Tuesday, Mar 25, 2008
Banks just taking the cheap cash and hiding it away.
Bloomberg: Euro Money-Market Rates Advance to Highest This Year
The cost of borrowing in euros on money markets rose to the highest level this year, a sign that attempts by policy makers to revive lending are failing to stop banks hoarding cash.
The euro interbank offered rate, or Euribor, for three- month cash increased 3 basis points to 4.70 percent, the highest level since Dec. 27 and its 14th straight gain, the European Banking Federation said today. The one-week rate rose 4 basis points to 4.32 percent, also the highest since Dec. 27.
``There's really only a handful of banks that are offering cash,'' said Ronald Tharun, a money-market trader at LRP Landesbank Rheinland-Pfalz in Mainz, Germany. ``Everyone is just waiting for the next bank to go down. There is no trust in the market. They're very afraid.''
4 Comments
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1. Plato said...
"The euro rate rose even after the European Central Bank provided an extra 14 billion euros ($21.8 billion) of emergency cash to banks today."
Next Step : Which will be the First Country to go Bankrupt ?
2. bystander said...
Interesting that Trichet and the rest of the ECB mafia continue to make bullish press releases about inflation, but also have their hands tied with potential slowing growth in the Eurozone, not to mention them feeding inflation by bolstering the financial sectors with huge, almost weekly payouts/ bailouts. We hear a lot about the money being fed by the FED and BoE, but very little about the constant trickle/ deluge delivered by the ECB. There are many areas of the Eurozone where property has far exceeded 3.5 x income, but these are not considered to be a problem as Germany has low personal debt and low owner occupancy, hence low prices. What about Spain, Ireland, The Netherlands etc which have seen massive booms in recent years. The Euro will begin to correct in the next few months and the fears of parity between Euro and GBP may be proved to be unfounded, IMHO.
3. cornishman said...
Read an interesting piece about velocity of money the other day. £1 sat in a savings account all year = £1. The same £1 which changes hands once a day = £365 in circulation over the year.
If all this extra cash injected by the central banks is building up there balance sheet and not being used [velocity = 0] - we are in a deflationary period - asset prices fall. Once the banks feel confident about lending again, all that cash starts to move around and we get rampant inflation.
Deflation/inflation? It's worth thinking about as regards quite where to park your stash at the moment...
4. cornishman said...
"building up there balance sheet"
building up their balance sheet
Woops