After a bloody week for stocks all over the world (unless you are called China), The Federal Reserve of America pumped 62 billion dollars into the jittery US financial system on Thursday and Friday to ease tightening credit linked to the crisis in the US subprime mortgage sector.
This is its biggest operation since the week of the September 11, 2001, terror attacks. I have but one thing to say, "Keep this up!"
Amid the sharp falls on global stock markets, almost all investors fears that more undisclosed bad debts would surface. This current fall was due to French bank, BNP, when it said that it would freeze three investment funds because it could no longer accurately measure their value. Aka, no one will buy its debt. The European Central Bank acted on Thursday and Friday when it added a combined 155.85 billion euros (212.98 billion dollars) to the eurozone markets.
Yes, this is a bail-out (let's admit it, it is) but it is what the markets needed to stem the blood-letting until calmer heads prevail. The chances are that BNP is not the only European bank getting crushed by these bad debts, other banks will come forward in the weeks to come. American banks will be the hardest hit by this crisis and when they come forward, the market will drop again.
The Fed and the European Central Bank must slow the sheer speed of the market losses. We want to go down a slope, not go off a cliff. Keep injecting the money guys.
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