Hyperinflation Madness: The ECB Dumps Over $500 Billion into
Banking System
Increase Decrease
December 18, 2007 (LPAC)--The European Central Bank (ECB) announced
today the latest unprecedented move, probably destined to be
unprecedented until tomorrow. As part of the deal struck by five
central banks last week, unlimited amounts of short term money are
being made available to any bank, at the cheapest possible rate of
4.21%. This is bare 21 points above the European official interest
rate, and way below the interbanking rate which has recently been
around 4.9%. The Financial Times reported that the ECB expected a
demand for the two-week money of Euro 260.7 billions, but by
mid-afternoon they were reporting that
Euro 348.6 billion - $502
billion - had been grabbed up.
This is the largest single money injection by the ECB in history.
Last week's announcement of auctions for about $100 billion had
been judged "too little" by the financial markets.
Parallel to the ECB's idiocy, today, the Fed will start the first
of a series of "universal" money auctions, i.e. where all banks can
participate and borrow anonymously, for an amount of $20 billion.
This is also the first auction in which the Fed will really
implement the decision (announced last August) of accepting
subprime and CDO assets as collateral, despite the fact that no one
knows what they are worth, if anything at all. All this money is
theoretically to be returned to the lender, but in practice such
loans will be refinanced again and again, so that the money stays
in the system and feeds hyperinflation.
While liquidity injections keep the corpse of the financial system
on a life-support scheme, the general insolvency of the system
cannot be cured. An extraordinary summit of the heads of state and
government of Britain, Germany and France has been called by Gordon
Brown during the first two weeks of January, in London, to address
the financial crisis.