Coordinated Rate Cuts A Big Help

So will coordinated rate cut do the trick?

Probably not, but it's a big help. The world's major central banks, laboring to avoid the mistakes that their predecessors made in the run-up to the Great Depression, joined together to cut interest rates to fight a virulent and spreading panic that is endangering the flow of credit and the world's economies. The one-half percentage point interest rate cut by the Federal Reserve, European Central Bank and Bank of England - joined by the Swiss and Swedes and blessed by the Japanese, whose rates are so low they cannot cut -- cannot cure the epidemic. Lower rates do help offset the unwelcome tightening of credit caused by banks reluctance to lend even to each other, and will lower the rates that the central banks themselves charge on the growing loans they are making to the financial system.

Read the whole story here.

Comments

[koluidj]

George Bush acknowledged that it now money is not help economy
Watch here: http://tinyurl.com/Bush-on-nbc

[thincaboutit]

FINANCIAL CRISIS: THE MUSICAL
The economy is no laughing matter. But this parody about the economy is.
Check it out at: http://www.youtube.com/watch?v=henMX35nkJg

[FredOCal]

Wow. This article is just nonsensical. I'll quote Illargi from today's AutomaticEarth:
"As predicted, the nonsensical global rate cut lifted shares for about half an hour. The reason why this can"t work is really simple. Banks won"t start lending to each other because of a half point rate cut, simply because they didn"t stop that lending on account of a half point. They stopped it because of the casino toilet paper each has in their vaults. And that paper is still there. Until it comes out, there is no solution."

The problem cannot be solved until banks know who is solvent and who isn't. Only then will they start lending to each other. It's really not that complicated.

[KillTheMessenger]

The rate cuts improve the banks' balance sheets ever so slightly. It also takes some of the risk out of loans. All by themselves they won't be enough. But since it is an instrument the central banks have, they should use it.