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plugging holes in the central banks of most recent attempts to increase liquidity will ease but not solve laenukriisiSa you could call it a bag of sand at the approach of the central bank. As the crisis in credit markets deepened and enlarged, central banks, including the U.S. Fed, has been developed to support the growing number of market opportunities that the collapse of more financial resources to more participants, a choice longer and wider tagatisena.See week brought the latest round of sandbags. The two announcements, on March 7 and 11, the Fed has promised a series of new measures. It extends the facility through which banks can provide liquidity and introduced a new scheme under which the central bank to provide up to $ 200 billion government bond market makers in exchange for assets such as dodgier securities backed by mortgages. On 11 March, other central banks joined ka.Finantsturud were delighted. The major stock indices on Wall Street has experienced the largest increase in a day in over five years. But optimism does not last. In the days that have sold the dollar drove gold above $ 1,000 an ounce and the dollar below 100 yen. Even if the tools are useful for the Fed, the bad news is largely möödas.Loogika ensure liquidity is simple: break the vicious circle of fear and forced sale. These days, many corners of the credit markets have become dysfunctional, investors have refused to hold all the links, but the safest government. Margins are generally safe and liquid markets, such as bonds issued by an official close to the mortgage giants Fannie Mae and Freddie Mac, the extent and prices wobbled alarmingly. The increased volatility and wider spreads quickly on the banks require collateral from borrowers, which in turn aggravates the shit. By providing a safe government bonds, and investors seeking the return of unwanted securities, the Fed intends to stop the spiral. Modest riskSee makes much sense. By reducing the panic caused by the rising share of credit spreads, liquidity, new tools to mitigate the damage that dysfunctional credit markets, otherwise the economy section. In addition, pressure on the central bank, rather blunt tool for policy interest rates lower. The Fed has already lowered interest rates in the short term 1.25 percentage points over the past two months, in part to fight against the credit crisis. Before liquidity measures this week, financial markets expect another rate three-quarters point cut in the next Fed meeting on 18 March introduction. With the rising prices of raw materials, plumbing new depths of the dollar, and inflation expectations, as the cut broadband would be risky. New tools to reduce liquidity, the probability that the Fed is stunned by kergemeelsus.Samavõrd the importance of their profits come only modest risk. Fed holds dodgier securities. But they are a guarantee for loans and discounts, it would lose money if those responsible for failure of loan market in Treasury bonds. The ECB has taken a long time for these securities as collateral. In the longer term, central banks desire to expand the liquidity support in times of crisis may induce banks to behave riskily (the temptation to have more effective rules to fight against liquidity requirements for banks). But it does not seem a problem today. The biggest danger is unreasonable expectations. provision of liquidity, but clever, is not a magic formula for the credit crisis. It relieves panic and buy time, but does not eliminate losses, to get rid of uncertainty, which will keep them or prevent a credit crunch that follows. And the bad news is far from over. As foreclosures and house prices is likely to accelerate loss estimates for securities backed by mortgages, now about $ 400 billion, it is still rising. The credit contraction will reflect these losses has barely begun. But the economy is already in recession. This is not official, but the latest employment figures, which indicate that private sector employment within each of the last three months, leaving little doubt that the economy is the buyer. Another loss for foreclosures, with the result of higher unemployment creates by default for everything about credit cards, business loans. There are some bright spots. Banks have to restrict the scale to squeeze by raising new capital to over $ 100000000000, but they can cause much more. Is it to cushion the slowdown in global growth remains strong. recovery plan George Bush will soon include a brief boost. But on balance, the economic downturn suggests that credit problems worsen before they improve. The strategy of the Fed to help avert the fate in the sand bag, but it does not support the sagging economy.

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