Problem solved?
Key central banks announce coordinated efforts to pump money directly into the commercial banking system. They will provide the capital banks desperately need to function on a day-t0-day basis. Once the banks begin to perform their function of lending money (first to each other, then to businesses and consumers), the economy will be OK.
That's the theory behind this weekend's meetings of the "G-7" countries. Stock markets should respond positively, in fact downright enthusiastically, to this news. But only the coming weeks and months will shed any real light on how effective these efforts will prove to be.
But wait. Why didn't the central banks figure this out before? It all seems so obvious now, doesn't it? Just give money to the banks.
Then again, maybe it's really not so easy to do. In fact, the question we should be asking is: where does all this money come from? Have the central banks of the world just been holding this money off to the side, just waiting for the right moment to inject it into the banks? And if so, why did they wait until the stock markets of the world plunged?
That's the theory behind this weekend's meetings of the "G-7" countries. Stock markets should respond positively, in fact downright enthusiastically, to this news. But only the coming weeks and months will shed any real light on how effective these efforts will prove to be.
But wait. Why didn't the central banks figure this out before? It all seems so obvious now, doesn't it? Just give money to the banks.
Then again, maybe it's really not so easy to do. In fact, the question we should be asking is: where does all this money come from? Have the central banks of the world just been holding this money off to the side, just waiting for the right moment to inject it into the banks? And if so, why did they wait until the stock markets of the world plunged?
Comments