Of little interest

Today's global interest rate cuts, regardless of how they might influence the current trading day, will have no impact whatsoever in solving the current crisis. That will only be achieved after all credit derivatives, still looming out there, have been dealt with and ridden out of the banking system. Liquidity concerns are not the primary focus in this crisis. What we are dealing with is, first and foremost, capital depletion related to the write off of bad assets. Banks worldwide have written off more than €400 billion in toxic waste. They have raised more than €300 billion in additional capital. But the IMF considers that several hundreds of billions more may still be needed.

Therefore, now that banks all around the world have reached their own limits in respect to their capability to write off assets and raise capital, the best solution would be a coordinated and global government bailout plan wherever there is direct exposure to Credit Default Swaps and similar markets. For this crisis to end, regulators and governments have to shut down those markets - buying them out for good. The U.S got the message. Asia has little direct exposure to it. Europe is still dabbling about it.

Reducing interest rates will do nothing in the long run. In fact, low interest rates are part of the problem since that is the element that led banks into this credit and leverage rampage.