Wow. Just...wow. This is the proverbial "Hail Mary" pass. This is what appears to be a last-ditch effort to thaw frozen interbank and
partially-frozen extrabank lending in the countries that use the Euro. This is fifteen governments in fifteen countries putting their countries'
money behind lending between banks, guaranteeing that if a bank defaults on its debt to another bank, the lending bank will be paid back.
From the Bloomberg story linked above:
 "I don't even want to imagine what might happen'' if the markets react negatively, Klaus-Peter Mueller, head of the German banking
association, said earlier today in Washington before the blueprint was unveiled. The market response may be something "we haven't seen at any stage in
our lifetimes."
We should have a clearer picture of the short-term effects in the next twelve hours. The important numbers to watch will be
TED spread (4.23 currently) and the
3 month LIBOR (4.23 currently). If those numbers drop, I will not be surprised to see
stock markets either rally or, at the very least, recoup some of the losses from the past month.
If those numbers do not drop, if the markets don't rally, then we're in a worse situation than I imagined.
ap.google.com
(visit the link for the full news article)
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