"shock and awe"

Will it work? The Fed joined the ECB and the Swiss National Bank to increase the amount of dollars in Europe. This comes as the spread on one-month Libor increased again after yesterday's disappointing quarter-point cut. Libor is now 5.10%, with a spread of 85 bips, much higher than September's 55 bip spread. September's half point cut by the Fed was prompted by this Libor spread. We would have seen another one yesterday, but for the fact that they already tried that and it didn't work.
They also understand that any liquidity added to the market will be immediately siphoned off by speculators betting on gold and commodity inflation.

A Fed official told reporters that the U.S. central bank's efforts won't add net liquidity to the banking system. (Bloomberg)

This quote is more troubling to me:

The Bank of England increased the size of reserves it will auction in money market operations and widened the range of collateral it will accept on three month loans.

Right now, the flight to safety crowd is fleeing headlong into money market funds and Treasury bonds. If the Central Banks aren't careful about the collateral they accept, then the currency they print will become tainted. I expect the Pound to fall against the dollar in the coming year. Remember, their property bubble makes ours look like a model of fiscal prudence and responsibility. They were giving out 125% loan-to-value mortgage and cash out packages to people buying houses six times their earnings.

Of course, transparency won't be part of the program:

The Fed official said that the central bank won't reveal the names of those
bidding for the funds. The auctions aren't aimed at helping particular banks, he added. Officials don't expect there will be any ``stigma'' attached to lenders bidding for the funds, the official said.

Funny how nobody seems to leak what's really important. How stupid does the media think we are? Never trust a fake leak. It's really propaganda.

This leaves the Fed still faced with the dilemma: How do we get people to lend money to keep the economy going? Unfortunately, even totalitarian regimes can't force people to lend money. One way is to punish hoarders and savers by lowering rates. However, the record amount of funds flowing into money market funds (cash) shows that so far, this is a losing battle. Rates will have to go a lot lower to persuade money flows to reverse. I think that we will see some inventive "solutions" trotted out by the central banks. Now that they are acting in concert, therefore, I believe that developed world banks will lower rates along with the Fed. This will put incredible pressure on China, et alia, to let their currency float. Since their stock market is closed, and their market is priced in Yuan, I believe that it's time the short the Shanghai index (FXI).