We mention the time we were together
So long ago, well I don't remember
All I know is that it makes me feel good now
--The Motels
Am continuing to pick up chatter like this that the situation in Europe is worse than appears. The EU version of TARP, the Long Term Refinancing Operations (LTRO), has seen a commensurate jump in bank funds with the ECB Deposit Facility to a record high half trillion euros.
The implication is that interbank lending in Euro is largely frozen. Banks are instead choosing to keep funds w/ the central bank.
Deja vu pangs here, as this is very reminiscent of the risk averse behavior we saw stateside in 2008.
Which probably shouldn't be surprising. After all, the situations are largely the same. Risk seeking behavior and easy credit ran up massive debt and leverage. Now risk appetites are waning. And price declines threaten leverage systems with insolvency.
position in SPX
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America's central bank, the Federal Reserve, is engaged in a bailout of European banks. Surprisingly, its operation is largely unnoticed here.
~former Dallas Fed Vice President, Gerald O'Driscoll
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