In an announcement released at two in the morning in New York, the Fed announced that it and other central banks would be providing unlimited liquidity to anyone who wanted it, more or less. Specifically, it said that participants to its new lending program, “will be able to borrow any amount they wish against the appropriate collateral in each jurisdiction.” This is like a giant no-money down, NO DOC loan to the entire global financial system. If the Fed could talk, you can imagine it saying…
October 14th, 2008 | Dan Denning | 1 comment | ContinuedAustralasia
Commentary on Australian and Asian economics, politics and society by your Daily Reckoning editors in Melbourne, Australia. Still haven’t subscribed to the Daily Reckoning? What are you waiting for… sign up here, it’s free!
A chronological listing of articles is below.
Lehman CDS Auction Hammers Australian Resource Stocks
Finally, Australia gets its own $700 billion plan. Kevin Rudd’s government moved yesterday to slap a Federal guarantee on all deposits with banks, credit unions, and building societies. The $700 billion guarantee includes Australian subsidiaries of foreign owned banks. The government wants people to understand their money is safe in the banks. That’s why that last bit is in there. It’s designed to keep foreign holders of Aussie dollars from engaging in a run on the dollar and bringing their money home.
October 13th, 2008 | Dan Denning | 1 comment | Continued
Australian Resource Shares, What’s Next?
IMF director Dominique Strauss-Kahn tried to kick-start stalled G7 negotiations in Washington this weekend by reminding everyone what was at stake. “Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown,” he said. It doesn’t get much more direct than that. The truth is, governments are trying to do the impossible. They are trying to make bad loans turn good.
October 12th, 2008 | Dan Denning | 1 comment | Continued
Nationalised Banking System Will Come from Global Market Rout
The situation in the financial markets has not improved over night. In fact, the crisis seems to be accelerating. But toward what? In the share market, we had a look back on the 2003 low on the ASX. On March 12, 2003 the index closed at 2,673. If the rally that began the next day and ended in October of last year was really just a multi-year rally in the midst of a secular bear market, you have to ask whether the 2003 low will be tested.
October 10th, 2008 | Dan Denning | 7 comments | Continued
CRB Commodities Index Has Largest Decline in 50 Years
While the RBA rate cut is good news for the Aussie share market, the utter collapse in global commodity prices is not. This week the CRB commodities index fell the most in over 50 years—the most ever in such a short period. What is going on and where will commodity prices go from here? Three factors have contributed to the huge reversal in resource prices. First is the global rush to cash. Investors have voluntarily liquidated positions they’ve held for years in order to be in cash.
October 8th, 2008 | Dan Denning | 3 comments | Continued
RBA Rate Cut Does Little to Unlock Credit Market
“Rally to me,” said Glenn Stevens. And investors did. The RBA rate cut WAS a full percentage point as we speculated yesterday. And it certainly did make a splash. Economists loved it. The critics praised it. And investors “huzzahed” the ASX 200 up nearly two percent on a day when the rest of the globe quaked in fear. What has changed? The bank has shifted from being worried about inflation to being worried about recession. A credit crunch?
October 8th, 2008 | Dan Denning | 4 comments | Continued
Future Fund ‘Borrowing’ Program Amounts to Theft
All attempts to reflate the system are failing. Leverage is collapsing. Next on the docket is a series of interest rate cuts by Central Banks. They RBA will probably lead off that global parade today at 2:30pm in Sydney. How big will the cut be? It will be 50 basis points for sure. But if the RBA really wants to make a splash-and give the banks room to pass on the reduction to borrowers-it will be a full percentage point.
October 7th, 2008 | Dan Denning | 7 comments | Continued
Bailout Bill Leaves Markets in Deep Freeze
Global share markets don’t look very convinced the U.S. Senate’s passage of a bailout bill will purge the financial sector of the bad debts which are killing it. Perhaps it’s because the Senate bill was such a joke. The plan, or FrankenTARP as we are now calling it includes restriction on judicial review, a suspension of the normal rules for drafting and debating legislation in front of Congress, and allows for the President and Treasury Secretary to come back as many times as they’d like for more. money.
October 3rd, 2008 | Dan Denning | 1 comment | Continued
Australian Recession in the Works? Ask the Sharemarket
All along it’s been assumed the fall in Australian shares is related to the credit crisis. But what if the stock market is actually forecasting an Australian recession? The stock market is a leading indicator. Shares lead the economy. So if shares are heading down, is the market telling us the Australian economy will soon follow into recession? It might seem counter-intuitive. After all, the country just racked up its highest trade surplus in 11 years last month.
October 3rd, 2008 | Dan Denning | 3 comments | Continued
Assets Race to the Bottom
Which asset class will find the bottom first? Will it be commodities, property, ore shares? And which shares? Local shares got a big yesterday, especially the miners.
October 2nd, 2008 | Dan Denning | 0 comments | Continued