My friend Get Yourself Connected had a really good take on today’s action by the Superfriends to “Save Europe”…
From Economic Disconnect:
The Unlimited Dollar funding machine announced today to ease lending conditions in Europe is another proof of the theorem that nothing has been solved, only set aside. Interbank lending had become very tight, and most will say it is because banks are nervous about what other banks hold as assets so they don’t want to lend even in short time frames. This is true but not correct. Bank know EXACTLY what they have themselves, and know it is garbage. They also know other banks have the same stuff. Thus the lack of faith in bank assets, they all know the real score. 3 years after Lehman Bothers failed (Happy Anniversary!) the swapping of garbage collateral for real cash continues unabated. It must be transitory.
Last summer things were bad but the FED came to the rescue and market players allowed the hope that more easing and more accommodation would turn around a ship that was in real trouble. It took a while for the data to get better, but markets lifted anyway, on the hope that it would get better. Remember all the games with “second derivatives” and “getting worse more slowly”? Yeah that.
Are we back there?
And I think GYSC is absolutely correct, I hate this Bad News is Good News phase. The fact that we are back to praying for intervention is just appalling. Because it is artificial and because we know that it is meant as subterfuge to disguise the real issues and because we know how it ends anyway.
But yeah, we’re back to all that. Do with that what you will…