"Unfreezing" is the hopeful word of the day. Everyone has been talking about a "credit freeze," but the credit markets made a dramatic turn early this afternoon. What happened?
The turn didn't happen upon news of the globally coordinated interest rate cut. Indeed, the reaction all morning was negative. One CNBC commentator suggested that the key may have been the President of the European Central Bank Jean-Claude Trichet, who said:
"We are there to be up to our responsibility, we call all authorities or institutions -- whether private or public -- to be up to their responsibilities, and we expect the market participants ... to be themselves up to their responsibilities.
"[Market participants] had clearly underestimated risks in the past, before the turbulences started. I would not like them, with the pendulum going totally in the other direction, to overestimate risks in general."
By the way, Reuters attributes the shift in stocks to "bargain hunting."
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1. Posted by fedgovernor on October 8, 2008 @ 14:41 | Permalink
What "dramatic turn" did the credit markets take this afternoon?
2. Posted by fedgovernor on October 8, 2008 @ 14:43 | Permalink
Um,
Reuters attributes all ups to "bargain hunting" and all downs to "Republicans."
Not exactly the best source ... considering that today they credited "bargain hunters" with an almost 200-point, 2.0% drop in the market.
3. Posted by Gordon Smith on October 8, 2008 @ 15:12 | Permalink
Yields were dropping early in the day. Around 1:30 pm EDT they started to increase rather dramatically.
I just stepped out for a couple of hours, but it looks like stocks are back down rather sharply. Crazy day on Wall Street.
4. Posted by Jake on October 8, 2008 @ 19:58 | Permalink
Trichet states:
"[Market participants] had clearly underestimated risks in the past, before the turbulences started. I would not like them, with the pendulum going totally in the other direction, to overestimate risks in general."
The learned president of the European Central Bank may have his likes and dislikes, but there is no question that the recent policy moves by central bankers in the US and abroad are a ratchet that works in but one way -- shifting costs from reckless bankers to taxpayers at large.
Responsible minds would convene a seance to summon Hayek and seek his wisdom.
5. Posted by Chris Schreiber on October 9, 2008 @ 13:49 | Permalink
We'll see what happens with the Lehman CDS auction today...
http://www.nakedcapitalism.com/2008/10/money-markets-still-frozen-dollar-libor.html#links
If it works smoothly, perhaps things will thaw a little bit.
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