News round-up: 13 Oct 2008

Happy Monday! After weeks of dire news and falling markets, we are seeing a rally that might have legs. For those of us who don’t want to see a global depression, that is very good news. Certainly, the markets have reason for rallying because the Americans and Europeans were able to pass bailout and crisis initiatives that have substance. Australia and New Zealand added their own banking deposit backstops, further fueling the upside. And finally, Morgan Stanley gt a much needed confirmation of an equity investment by the Japanese financial giant Mitsubishi UFJ.

Marshall Auerback and I both noted that the U.S. Federal Reserve has apparently agreed to lend unlimited quantities of dollars to the European Central Bank, the Bank of England and the Swiss central bank as these three central banks are auctioning unlimited dollar funds at a fixed interest rate in order to push down inter-bank lending rates (see story).

Therefore, it is apparent that the recent moves by monetary authorities will clearly lead to a massive increase in the money supply and are highly inflationary. As further information becomes available, we can better speculate as to what this should mean for currencies and precious metals. But on its face, it suggests that precious metals would be a good hedge against fiat currency depreciation.

Crisis News
Fed Approves Wells Fargo-Wachovia Deal – Deal Book
Wells Fargo May Cut Wachovia Investment Bank Unit – Bloomberg
MUFJ Closes Investment in Morgan Stanley – Deal Book
How to capitalise the banks and save finance – FT
2 German state savings banks explore merger – Forbes
Finance Students Keep Their Job Hopes Alive – Deal Book
Funds of Hedge Funds are Under Pressure – WSJ
What it means: Words that define the downturn – Houston Chronicle

Crisis authorities’ moves
Fed Says ECB, Others to Offer Unlimited Dollar Funds – Bloomberg
EU Nations Commit 1.3 Trillion Euros to Bank Bailouts – Bloomberg
UK Government to take majority stake in RBS – Telegraph
UK launches £37bn bank rescue – FT
Barclays Plans to Raise More Than 6.5 Billion Pounds – Bloomberg
Germany Pledges EU500 Billion in Bank Rescue Plan – Bloomberg
Australia and NZ launch bank safeguard plan – FT
Australian Funding Costs Decline After Governments Back Banks – Bloomberg
Irish bank plan approved by EU after modifications – Irish Independent
Brussels approves Denmark’s bank package – FT
Iceland Minister Says IMF Aid Needed to Attract Foreign Loans – Bloomberg
Iceland stock market to stay shut – BBC News
France moves to guarantee banks – Finance24
Euro Rises Most in 3 Weeks as European Leaders Guarantee Banks – Bloomberg
South Africa Rand Advances as Stocks Rise on Bank-Support Plan – Bloomberg
Mexico Peso Gains Most in 13 Years, Brazil Real Most Since 2002 – Bloomberg

Other news
Krugman wins Nobel for economics – BBC News
Ballmer’s Yahoo Failure Gives Microsoft `Nice Miss’ – Bloomberg