Juggling Dynamite

Risk markets were all lower overnight and early this morning. Then Central bankers led by the US Fed announced emergency intervention to help lower the swap costs for US dollars needed by the ECB for Euro banks. As with all currency market interventions, this effort is almost certainly destined to be short-lived, but today at least it has succeeded in weakening the US dollar on the FX markets. The Euro crisis is driving investors out of the Euro in search of safer haven alternatives–they want dollars and they have been driving up its price. Euro-banks have been struggling to keep up with the demand. This has caused them to sell a weakening Euro and drain further liquidity from a banking system already in the midst of a massive (solvency) crunch. The greater the crunch, the higher the swap costs, the harder and more costly to get U$. Central bankers intervened today with a plan to ease pain and help the ECB get access to U$ dollars. But it does nothing to fix the financial crisis which is growing wider by the day. The Euro zone is facing the modern-day equivalent of a bank run. Meanwhile our dysfunctional markets driven by unregulated, high-frequency risk-trading-robots see U dollar down on the teeter totter and start hitting the ask on risk markets across the board. Apparently in 2011, bank runs in the second largest economic zone in the world are all good.

Matt Taibbi of Rolling Stone discuss the remarkable decision by U.S. District Judge Jed Rakoff to reject a $285 million settlement between Citigroup and the Securities and Exchange Commission for misleading investors. Taibbi points out that banks take punitive settlements in stride, saying, “They recognize that every now and then they’re going to get dragged into court, they’re going to have to give a little bit of money to somebody, and then they get to walk away and keep doing it.” Here is the link if you can’t see clip below.

As the world’s Central bankers once more “co-ordinate” to promise fire trucks full of money to the freezing global credit markets, stock markets are doing back-flips on the news. The fact that global contagion and recession risks are now evident enough to prompt such radical announcements is apparently news for another day. In the meantime, this clip made me giggle. For the adults in the room, giggles these days are not too plentiful and always much appreciated.

Link to clip here.