Another global influx of cash

Yesterday central banks but on their fallout helmets as they did in September 2010 and during 2008. In a coordinated effort, the Fed and ECB and other banks in England, Japan and Switzerland pumped some liquidity into the markets by saying that they will guarantee an influx of foreign currency in the banks, especially dollars.

In what way? Well they lowered the price of foreign exchange contracts for issuers who take a foreign currency and loan it to their lenders. The banks explained that this would further reduce the price of guarantees and would be maintained until 2013.

Is this a solution? Well somewhat, as with what happened in 2010 and 2008. Perhaps it simply retraces the serious challenges faced by European banks, whose destiny is tied to the fate of sovereign debt, in getting dollars. As Moody?s confirmed, the EU nations cannot back their lenders as the crisis worsens.

That has generated some resistance to European risk and the large barriers to financing for the big banks that depend on it. Therefore, the monetary advisors have prepared a bailout. But in no way will this bring sufficient funds for solving major solvency needs.

Nonetheless, yesterday the market considered it an early indicator that the EU, backed by other countries, is finally starting to take action. But for now, things still look bad. The only step discussed was a European recovery fund that does not raise additional capital and therefore it would be necessary to resort to the IMF. But who will put up the cash if the IMF would not? The wealthy Germans are the favorites for providing the necessary funds, and everyone will wait for the summit on December 8 and 9.