Governments and Central Banks in Panic Mode

In case some people were not sure, these below are not signs that everything is fine and that the green shots of 2009 are not producing an impressive massive harvest... quite the opposite.

Euro Central Banks Seen Providing Up to $270 Billion via IMF

(Bloomberg) — 02 Dec 2011 — A European proposal to channel central bank loans through the International Monetary Fund may deliver as much as 200 billion euros ($270 billion) to fight the debt crisis, two people familiar with the negotiations said.

At a Nov. 29 meeting attended by European Central Bank President Mario Draghi, euro-area finance ministers gave the go- ahead for work on the plan, said the people, who declined to be named because the talks are at an early stage. The need for a new crisis-containment tool emerged as the effort to boost the 440 billion-euro rescue fund to 1 trillion euros fell short.

Swiss Government May Consider Negative Interest Rate Policy 

(Bloomberg) — 01 Dec 2011 — Switzerland’s government said it may consider additional measures including negative interest rates to aid the country’s central bank in its fight against the appreciation of the Swiss franc. [...]

Stocks surge on Central Bank liquidity offering

Nov. 30 (Bloomberg) — The central banks of the U.S., the euro region, Canada, the U.K., Japan and Switzerland agreed to cut the cost of providing dollar funding via swap arrangements, the Federal Reserve said, and agreed to make other currencies available as needed.

China said earlier today it will cut the reserve requirement ratio for banks by 0.5 percentage points from Dec. 5, while data on U.S. business activity and the employment and housing markets topped economists’ estimates.

 U.K.’s Cable Urges ‘Unlimited Powers’ for ECB Amid Euro Crisis

Nov. 13 (Bloomberg) — U.K. Business Secretary Vince Cable said the European Central Bank needs unlimited powers to support the euro and the region’s debt-ridden economies.

“If a monetary deal’s going to work, the central bank has to have unlimited powers to intervene to support economies, and indeed banks, to prevent collapse,” Cable said in an interview on BBC television’s “Politics Show” today. “They need to have that clearly at a European level, and that’s one of the issues that hasn’t yet been adequately clarified.”

Goldman Sachs' Ben Broadbent appointed to the Bank of England's Monetary Policy Committee

We are and always have been doing business as usual, in the US, the UK, and most of all European Union countries, who all have former Goldman Sachs directors appointed for government roles such as the Treasury department or the Central Banks.

Here's the list from the report:

• New York Federal Reserve Bank President William Dudley
• Bank of Canada Governor Mark Carney
• Bank of Italy Governor Mario Draghi
• Former Treasury Secretary Henry Paulson
• Former Treasury Secretary Robert Rubin
• Adviser to George W. Bush, Stephen Friedman

So please don't tell me you are surprised, this should be just normal news flow, nothing out of the ordinary:

March 8 (Bloomberg) -- The Bank of England’s appointment of Goldman Sachs Group Inc. Senior European Economist Ben Broadbent to its Monetary Policy Committee shows governments are again looking to the firm for top decision makers, less than a year after it settled U.S. fraud claims.

Broadbent, who has worked at Goldman Sachs since 2000, will replace Andrew Sentance at the end of May, the Treasury in London said yesterday. He joins a panel that has split four ways on policy for the first time since the central bank’s independence in 1997.
[...]
Even the SEC has shown an interest in luring Goldman Sachs’ expertise. In January, it hired Eileen Rominger, who spent 11 years in the firm’s asset-management division, including as global chief investment officer. She now heads the SEC’s division of investment management.

In July, the firm paid $550 million to settle SEC civil claims that it misled investors in a mortgage-linked investment that was sold in 2007.

In a separate case last week, the agency accused Rajat K. Gupta, a former Goldman Sachs board member, of telling hedge- fund manager Raj Rajaratnam about Warren Buffett’s $5 billion investment in the bank in 2008 before the deal was announced. Gupta and Rajaratnam deny the insider-trading allegations. The firm wasn’t accused of wrongdoing.

Former Goldman Sachs employees hold key policy-setting positions worldwide. New York Federal Reserve Bank President William Dudley is the firm’s former chief U.S. economist. Bank of Canada Governor Mark Carney is a former managing director. Bank of Italy Governor Mario Draghi, the current frontrunner to become the next president of the European Central Bank, was vice chairman of the firm’s international arm.

Henry Paulson and Robert Rubin both headed the bank before becoming Treasury secretaries, while other former leaders include Stephen Friedman, who was an adviser to President George W. Bush, and Jon Corzine, who governed New Jersey.

Broadbent is the third Goldman Sachs employee to join the Monetary Policy Committee. Former U.K. rate-setters David Walton and Sushil Wadhwani had Goldman Sachs on their resumes before joining the central bank. Broadbent also has worked previously at the Treasury and the Bank of England.
[...]
Wall Street has provided other executives for government positions this year. In January, President Barack Obama named William Daley, 62, a JPMorgan Chase & Co. executive and former commerce secretary, as his chief of staff.

More on Broadbent below. Unfortunately, Sentance, who is leaving this position, was the most hawkish of the rate setters. Does it mean the government is looking for more monetization of their debt?

March 8 (Bloomberg) -- Britain’s economy can withstand the government’s budget squeeze and an interest-rate increase, according to research published this week by Ben Broadbent, the Goldman Sachs Group Inc. economist who will join the Bank of England’s rate panel in June.

“The fiscal adjustment that the government plans over the coming years is undoubtedly severe,” London-based economists including Broadbent wrote in an e-mailed note dated March 6. “Nevertheless, we take a more sanguine view than many of its impact over the medium term.”

Broadbent, who previously worked at the Treasury and Columbia University, will replace Andrew Sentance on the central bank’s Monetary Policy Committee on June 1, the Treasury said yesterday. He sees investment driving U.K. economic growth this year and his projections for expansion are above the median forecast of economists in a Bloomberg News survey.

While it’s “hard to see much growth” in incomes and consumer spending this year, the economic impact from any potential interest-rate increases by the Bank of England may be limited, Broadbent wrote in the note with economists Kevin Daly and Adrian Paul.

“Investors are concerned that any increase in interest rates would seriously threaten overall economic growth too, both directly, via the effects of cash-flow on consumer spending, and indirectly, by raising the rate of default in the mortgage market,” the economists said. “This concern is understandable but, in our view, it is routinely exaggerated.”
[...]
Broadbent will join a committee that has split four ways on policy for the first time since the central bank’s independence in 1997. With inflation at twice the bank’s target and the economic recovery threatened by the government’s fiscal squeeze, policy makers are divided on whether to increase interest rates or expand stimulus.

The bank’s rate-setting panel starts its next two-day policy meeting tomorrow. Last month, Sentance voted to increase the benchmark interest rate by 50 basis points from a record low of 0.5 percent. Martin Weale and Spencer Dale called for a 25 basis-point increase, while the remaining six opted to maintain the current rate. Adam Posen voted to expand the bank’s bond- purchase plan.

“Sentance was at the extreme hawkish end of the MPC but we do not think his loss will divert the focus of the committee,” said Jens Sondergaard, an economist at Nomura International Plc in London who previously worked at the Bank of England. “In our view, Mr. Broadbent will join the hawkish end of the MPC. His view has tended to be more optimistic than the consensus.”

BoE governor Mervyn King touting the benefits of eliminating fractional reserve banking

A lot of ink has been spilled on Mervyn King's speech at the Basel III conference, so I decided to go read through it and see for myself, and I admit that I am positively surprised by what has been said!

Sadly, I do not think that he actually means that we should eliminate fractional reserve banking — which, to many Austrian economists is nothing but legalized fraud — but that he merely uses it as a scarecrow... but nonetheless, just the fact that he mentions it as the best solution to the banking crisis is an amazingly big step forward.

In September 2007, everyone thought that the crisis was one of liquidity and as a result there was an expectation central banks could provide the solution. But it quickly became clear that it was in fact a crisis of solvency.
[…] And not only are banks’ assets risky, but banks are highly leveraged institutions. This leaves them heavily exposed – with very high debt-equity ratios, small movements in asset valuations are enough to wipe out their equity and leave banks insolvent. That means the distinction between illiquidity and solvency can be difficult in practice – the difference in timing might be just a few days. If a crisis is in fact one of insolvency, brought on by excessive leverage and risk, then central bank liquidity provision cannot provide the answer. Central banks can offer liquidity insurance only to solvent institutions or as a bridge to a more permanent solution.

It is this structure, in which risky long-term assets are funded by short-term deposits, that makes banks so hazardous. Yet many treat loans to banks as if they were riskless. In isolation, this would be akin to a belief in alchemy[…]For all the clever innovation in the financial system, its Achilles heel was, and remains, simply the extraordinary – indeed absurd – levels of leverage represented by a heavy reliance on short-term debt
[…]
Modern financiers are now invoking other dubious claims to resist reforms that might limit the public subsidies they have enjoyed in the past. No one should blame them for that – indeed, we should not expect anything else. They are responding to incentives.
[…]
Basel III on its own will not prevent another crisis for a number of reasons. First, even the new levels of capital are insufficient to prevent another crisis. Calibrating required capital by reference to the losses incurred during the recent crisis takes inadequate account of the benefits to banks of massive government intervention and the implicit guarantee.
[…]
So, if we cannot rely solely on these types of measures, are there more fundamental directions in which we could move that would align costs and benefits more effectively?
One simple solution, advocated by my colleague David Miles, would be to move to very much higher levels of capital requirements – several orders of magnitude higher.
[…]
Another avenue of reform is some form of functional separation. The Volcker Rule is one example. Another, more fundamental, example would be to divorce the payment system from risky lending activity – that is to prevent fractional reserve banking.
[…]
And eliminating fractional reserve banking explicitly recognises that the pretence that risk-free deposits can be supported by risky assets is alchemy. If there is a need for genuinely safe deposits the only way they can be provided, while ensuring costs and benefits are fully aligned, is to insist such deposits do not coexist with risky assets. The advantage of these types of more fundamental proposals is that no tax or capital requirement needs to be calibrated. And if successfully enforced then they certainly would be robust measures.

Denmark the next country to default?

Bloomberg has published an article summing up information found in a ECB report and the conclusions are quite scary. The UK is in very serious trouble, but it looks like Denmark is in far worst state than even the UK. All in all, I am a bit doubtful about my long EUR position against both the USD and GBP because depending on what the ECB will do following the collapse of one of the many default-candidates in the Eurozone. My position will need to be assessed but for now, I think the ECB has been able to control is destructive powers and even if I stated several times that Trichet should resign, it still seems that he's trying to avoid following the BoE and the Fed toward hyper-inflation. [Update: Just to clarify, Denmark is not in the Eurozone. But Portugal, Greece, Spain, Italy are. It will also be interesting to see what the ECB does if (when?) Denmark defaults]

June 12 (Bloomberg) -- European governments have approved $5.3 trillion of aid, more than the annual gross domestic product of Germany, to support banks during the credit crunch, according to a European Union document.

The U.K. pledged 781.2 billion euros ($1.1 trillion) to restore confidence in its lenders, the most of any of the 27 EU members, according to a May 26 document prepared by officials from the European Commission, the European Central Bank and member states and obtained by Bloomberg News. Denmark, where 13 of the country’s 140 banks were bailed out by the central bank or bought by rivals last year, committed 593.9 billion euros. [...]

[My Comment: Denmark: Population of 5.5 Million (less than Greater London) GDP of around $200 Million, 140 banks (!!!!) 13 of which were bailed out with about 600 B€ that is about 4 times the GDP of country. Denmark reminds me of Iceland...]

EU governments approved about 311.4 billion euros for capital injections, 2.92 trillion euros for bank liability guarantees, 33 billion euros for relief of impaired assets and 505.6 billion euros for liquidity and bank funding support, a total of 3.77 trillion euros, the document shows.

The U.S. government and the Federal Reserve had spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, as of March 31.

[My Comment: there still is a huge gap between the waste done by the EU and the US]

A majority of new member states including Slovakia, the Czech Republic, Estonia and Lithuania have not taken public measures to support their financial markets, the draft said. Many banks in the region are foreign-owned. More than 80 percent of bank loans in central and eastern Europe come from lenders owned by six western European EU countries, according to Moody’s Investors Service.

All together, the EU paper said that 18 member states have introduced bank liability guarantees, 15 have approved recapitalization measures, and 11 have given liquidity support.[...]

The British government this year secured promises of additional mortgage and business lending from Lloyds Banking Group Plc, Royal Bank of Scotland Group Plc and Northern Rock Plc in return for aid.[...]

Banks in Germany received the third-largest amount in aid, the document showed, for a total of 554.2 billion euros. Commerzbank AG, Germany’s second-biggest bank, was told to sell its Eurohypo commercial property unit by the Commission on May 7 to win approval for a second bailout by the German government.

Following is a table of European government’s commitments. All figures are in billions of euros and include capital injections, guarantees granted, effective asset relief and liquidity interventions.

United Kingdom 781.2
Denmark 593.9
Germany 554.2
Ireland 384.5
France 350.1
Belgium 264.5
Netherlands 246.1
Austria 165
Sweden 142
Spain 130

Here are the previous related posts:

• 2009-05-18 Trichet not as hopeless as it seems
• 2009-14-18 Trichet should resign
• 2009-03-12 ECB Stealthly Approaches Zero Rates
• 2008-10-14 R.I.P EUR
• 2008-08-08 $ up 0.05 € in 24 hours as Trichet abandons war against inflation

UK refuses to release stress tests results

Isn't that just perfect? Who can believe any bank for which the stress cannot be disclosed because of market instability is solvent? It simply means that those bank are on the verge of falling and cannot leave without stealth government and BoE funding. Just remember that Gordon Brown passed a bill allowing the BoE to not disclose their liquidity assistance...

Notice also that Bloomberg is doing quite a fantastic job, trying to force the information to come out. I am also taking good note of the inconsistency in the FSA's replies which just confirms that they are also corrupt, like the SEC.

(Bloomberg) -- The U.K. refused to release the results of stress tests conducted on British banks, two weeks after the Federal Reserve said similar reviews showed 10 U.S. lenders needed to raise a total of $74.6 billion.

Publishing the information may increase instability and force the government to take further action to shore up the U.K. financial system, the Treasury said in response to a Freedom of Information Act request by Bloomberg News that sought the test results and criteria used to evaluate banks. U.S regulators said publishing their findings would ease concerns about lenders.

“Keeping the information under wraps will only serve to create more uncertainty in the long term,” Vince Cable, the opposition Liberal Democrats’ spokesman on treasury issues, said in an e-mailed statement. “We need a system that is as open and as transparent as that in the United States.”

The Financial Services Authority carried out stress tests on U.K. banks earlier this year to determine their ability to withstand losses amid the worst recession in 60 years. Barclays Plc is the only bank to have disclosed its results, saying it will continue to meet the regulator’s capital requirements under various credit risk, market risk and economic scenarios.

Disclosure of the results “at this time may lead to uncertainty in financial markets, either in relation to specific institutions or more generally,” the Treasury said in its response to Bloomberg. “Such instability could require further action by the authorities.”

The same request to the FSA was rejected on the grounds it would be too costly to retrieve the documents. Lesley Richardson, an FSA freedom of information officer, said the results wouldn’t be released in any case because the information was confidential.

The U.K. has committed as much as 1.4 trillion pounds ($2.2 trillion) to bolster the nation’s banking system through direct investments, asset insurance and underwriting loans. The government has nationalized Northern Rock Plc and Bradford & Bingley Plc, and taken controlling stakes Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc.
[...]
“The transparency of companies over the last few months has significantly improved so it is ironic that the one body who isn’t joining in the transparency is the regulator itself,” said Ian Gordon, an analyst at Exane BNP Paribas in London.

Explosive cocktail of fraud, lies and theft in the UK

Following my previous post about the Explosive cocktail of fraud, lies and theft in the US, it wouldn't be fair to also talk a bit about the UK, which is in my opinion in a far worst shape than the US.

Feb. 18 (Bloomberg) -- Bank of England policy makers unanimously agreed to ask the government for authority to create money in an effort to kick start the economy, saying further interest rate cuts may hurt the profitability of banks.

The Monetary Policy Committee, led by Governor Mervyn King, voted 8-1 to cut the main rate to 1 percent, the lowest since the central bank was founded in 1694, minutes of the Feb. 5 decision published in London today show. David Blanchflower, argued for a deeper reduction so rates go as low as possible “without delay.”

I would like to know what kind of outcome they are expecting and the why and how it would help the economy to sink the pound even further?

The minutes suggest rates cuts are becoming less potent, pushing the central bank to use unprecedented means to revive the economy from its worst slump since 1980. King and Chancellor of the Exchequer Alistair Darling will exchange letters about the next steps within a few days, a spokesman for the Treasury said.

I can't wait to see this parody of democracy and their ridiculous letters again... Sad but real... I had a post about that a while ago.

“To the extent that further cuts in bank rate could not inject sufficient stimulus, the committee would need to use alternative policy measures,” the minutes said. “Therefore the committee unanimously agree that the governor should write on its behalf to the chancellor to seek authority to conduct purchases of government and other securities, financed by the creation of central bank money.”

Stimulus = printing money & free money for banks

[...] “The central bank is doing everything it can to boost liquidity,” Bob McKee, chief economist at Independent Strategy in London, said in a Bloomberg Television interview. “It takes some time for lower interest rates to work through.”

Liquidity = printing money & free money for banks

Gordon Brown hails £500 billion bank rescue plan
Gordon Brown has said a £500 billion bail-out of British banks will restore "confidence and trust" in the financial system.

bail-out = printing money & free money for banks
£500 billion bail-out = printing £500 billion & and giving it to banks

Admitting that Government borrowing will have to be drastically increased to fund the package, Mr Brown insisted that "for every family in the country, the stability of the banking system matters."

Government borrowing = printing money & free money for banks

Why does it matter for every family? Why don't you just let the bad banks collapse in order to make the system stable? Why don't you cancel the fractional reserve banking and reckless speculation by banks instead of handing them £500 billion more?

He said taxpayers would "earn a proper return", saying: "This support is on commercial terms. We expect to be rewarded for the support we provide."

Yet another big fat lie... How much is the return so far on RBS, HBoS, Lloyd, Northern Rock, B&B ? About -99%.

Central Banks Market Tinkering & The Unintendended Consequence - pt 2

Another unintended and costly consequence of the Fed tinkering the rates and changing the rules overnight and panicking has been spotted by Mish:

Why Banks Aren't Lending

• Banks are insolvent.
• Banks do not trust each other.
• There can be no trust with suspended mark to market accounting. No one believes what assets on balance sheets are really worth and there is no way to find out.
• By suspending mark to market accounting the SEC heightened mistrust.
• As part of the TARP passed by Congress, the Fed is paying interest on reserves.
  

Bernanke wanted ability to pay interest on reserves to put in a floor on interest rates. I am quite certain he believed he could hold rates at 2 with this provision. It did not work that way did it? The Fed Fund rates is now at 1.50 and interest rates futures suggest it is headed to 1.00 by March.

But an easily seen (yet still unseen by the Fed) ramification of paying interest on reserves is the fact that banks can collect interest by leaving money on deposit at the Fed rather than lending it out [emphasis mine].

Why should banks risk lending money to consumers or bank when instead they can deposit money at the Fed and collect interest? Thus, paying interest on reserves not only failed to put in a floor on rates, it also gave banks one huge reason not to lend.

This cancerous activity is now starting to get extremely counterproductive.

Central Banks Market Tinkering & The Unintendended Consequences

Bloomberg reported that the major central banks decided to lower rates all together by 0.5% in order to help the credit markets:

Oct. 8 (Bloomberg) -- The Federal Reserve, European Central Bank and four other central banks lowered interest rates in an unprecedented coordinated effort to ease the economic effects of the worst financial crisis since the Great Depression.

The Fed, ECB, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point.

Is this going to help the markets recover? No.
Is this a good thing for the economy? No.
Is this a good news for your savings and your currency? No.

Why isn't it going to help the markets?

Well, to understand this, you need to read again the quote above. Who is missing there? We have the US, EuroZone, Sweden and Canada. One major bank is missing, and it is Japan. Japan's rate is already at 0.5%, so they won't decrease it to 0.0% (hopefully!!). But what happened with a "surprise" rate cut (which I had forcasted this week-end) is that it created a massive short-squeeze on the Yen, with the hundred of billions of USD and EUR invested by borrowers of JPY. This led the Yen to rise 10% against the USD in a couple of minutes only! The USD crashed from about 106-107 Yen to 99!

The unintended consequence of market tinkering is that the yen-carry-trade will have to unfold and lead to a massive delveraging that is going to cost a lot to many players and investors and further sunk the markets.

Why isn't it a good thing for the economy?

Because the economy is already chocking due to too much credit and the unability of the market players and consumers to pay back. This is not going to help people borrow more. This is not going to help the banks neither, since the effective Fed Funds rates was already 0.0% as I mentioned yesterday.

People who couldn't pay back their mortgages won't be able to do so thanks to a 0.5% decrease rate.

Why isn't it a good thing for your currency?

Inflation will be unleashed (if it wasn't already). Gold is up 40$ an ounce.



PS: side note - comments are more than welcome on all my posts and also, please help people discover my blog by sending them the post you find interesting.

Mervyn King's Open Letter to Alistair Darling

Mervyn King, the Governor of the Bank of England has sent yet another letter to Alistair Darling to explain why inflation is about twice as high as the target of the BoE. Darling's ridiculous reply is available here.

He basically states that the rise of the prices is due to the plummeting value of the British Pound, which has lost 15% of its value in the past few months and rising costs of commodities. And that he expects inflation to be out of the target for at least a year.

He fails to point that the falling value of the GBP is due to the cut of the repo rate he made a few months ago and to the fact that investors are expecting further cuts and they know that neither Darling, nor Gordon Brown nor Merving King will have the political courage and the guts to defend their currency and will try to devalue their currency in the hope of getting more votes at the next election and save their own personal political career at the expense of the currency of their country and trading the future of the British citizens against a short sighted target (the ballot).

Merving King writes as if inflation was out of his control and that he couldn't do anything to prevent it, even though the only tool that can be used to fight inflation is the very tool that only the BoE controls: the BoE rate! Just raise the rates!

Darling/Brown and King are just playing a political game and gambling the future of their country. Shame on them!

Here's why cutting rates won't do any help but rather make things a lot worse:

• The very reason why we are in such a mess is that the rates have been kept too low for too long, creating the real estate bubble and the credit binge
• The UK citizens have the sad world records of both the biggest debt per capita across the whole world and the biggest dept per capita in the history. This is a two dimensional record that will hit the economy very hard and which also end in personal disasters.
• The UK imports most of the products and commodities it needs. Reducing rates will make the GBP fall further and hence increase the imported inflation while not having any upside.
• The UK doesn't have any productive force or industry. A falling GBP will not help export anything.
• The UK relies on foreigners across the whole world to do the low end jobs and the top end jobs. Most workers from Eastern Europe for example in the UK don't mind having low end jobs because it pays well compared to the income they have in their home country. Most people in the City are the same, but on the other side of the scale. They are the productive workforce of this country. They are now starting the leave, as I have seen reported many times and experienced among my colleagues/friends. Once it reaches the point very it's too late, the UK will understand how dependent it is the foreigners, but also how important it was to have a strong currency.
• The UK citizens need to save money, not spend more. Raising rates would help that.
• It won't work anyway, as shown in this Bloomberg report (this is a MASSIVE move):
  

  Sept. 16 (Bloomberg) -- The cost of borrowing in dollars overnight more than doubled to 6.44 percent, its biggest jump, according to the British Bankers' Association.

  The London interbank offered rate or Libor, increased 333 basis points from yesterday, the BBA said today.

So why will they lower rates? Because they are trying to reflate a real estate bubble that will only take longer to pop and cause more havoc. They somehow managed to convince people that borrowing for the rest of their lives to live in a one-bedroom flat 50 miles from their workplace is great and that houses should be unaffordable. This is the Great Con of the past several years. And now, people expect help from the government to prevent the house prices to collapse, at their own expense!

Actual people are getting bankrupt. Actual families are losing their homes. King/Brown/Darling are playing with the personal lives of their citizens for the benefit their own personal careers. This is just disgusting and sick.

More info about Central Banks intervention on the USD

Reuters is reporting:

NEW YORK, Aug 27 (Reuters) - The United States, Europe and Japan had planned to intervene and rescue a weak U.S. dollar in March, business newspaper Nikkei reported on Wednesday.

Officials from the U.S. Treasury Department, Japan's Finance Ministry, and the European Central Bank reportedly drew up a currency contingency plan to be undertaken over the March 15-16 weekend, Nikkei reported, citing sources familiar with the situation.

The monetary officials also agreed on a framework for coordinating dollar-buying intervention, the report said.

They conclude that the intervention did not happen.

However, Stefan Karlsson reports that central banks are purchasing dollars on this post.

It's still very blurry and impossible to conclude anything, and with the month of August ending and people getting back from holiday, things might get more normal. After that, next big mile stone will be the election in the US... It seems like Paulson and friends are trying to make everything they can the hand the collapse to the next president, even if it means adding a few trillion USD on the shoulders of the American Citizens.

Ex-BOE Official Slams Fed

Very interesting article on Bloomberg. Here are some quotes (emphasis added):

Aug. 24 (Bloomberg) -- Former Bank of England policy maker Willem Buiter sparked the biggest debate at the Federal Reserve's annual mountainside symposium, saying the central bank pays too much heed to the concerns of financial institutions.
``The Fed listens to Wall Street and believes what it hears,'' Buiter said yesterday in a paper presented to the Fed's conference in Jackson Hole, Wyoming. ``This distortion into a partial and often highly distorted perception of reality is unhealthy and dangerous.''
[...]
The steepest interest-rate cuts in two decades risk stoking inflation, while the Fed has been too generous in aiding banks, said Buiter, 58, a founding member of the Bank of England's independent rate-setting board in 1997.
[...]
Buiter said the Fed's emergency lending programs are too generous. The U.S. central bank is making up to $200 billion of its Treasuries holdings available to primary securities dealers, and $150 billion of funds through auctions to commercial banks. In addition, banks are able to borrow directly from the Fed.
``You don't let your borrower determine the value of the collateral offered to you,'' Buiter said. ``That's just crazy.''
[...]
Two economists echoed Buiter's concern in another paper presented yesterday, saying the Fed's program allowing institutions to swap Treasuries for mortgage bonds and other debt enables firms to ``window dress'' their balance sheets.
[...]
``Financial institutions can hold low-quality securities for the period where no reporting is required,'' wrote Franklin Allen of the University of Pennsylvania and the University of Frankfurt's Elena Carletti. ``Temporarily increasing the supply of Treasuries makes this kind of deception easier. It helps remove market and regulator discipline.''

Gordon Brown's reform is quite the opposite of what you would expect.

According to reuters:

The proposed banking reform bill will allow short-term non-disclosure of liquidity assistance by the Bank of England[...]