News Round-Up: 6 Oct 2008

If you were away on Holiday this past week or just away from the hustle and bustle of civilisation this past weekend, you may have missed the firework in Europe. Basically, over the past week, what started as a U.S. subprime crisis and then became a U.S. banking crisis metastasized into a European banking crisis too. The link: money markets.

As inter-bank lending has slowed o a crawl and bank lending rates to each other have gone through the roof, the European banking system has come under attack. Because banks lend to customers for long periods (as much as 30 years), but fund operations through shorter-term borrowings, liquidity in the inter-bank market is very important. As that liquidity is gone, many banks, irrespective of nationality, have fallen victim.

Be prepared for more volatility in banking until a political fix to the money market problem is found.

Below is a bevy of links from Bloomberg and one or two others.

Europe
Hypo Real Gets EU50 Billion Government-Led Bailout – Bloomberg
Dollar Reaches 13-Month High as Credit Crisis Spreads to Europe – Bloomberg
BNP Paribas to Purchase Fortis’s Units in Belgium, Luxembourg – Bloomberg
Germany Guarantees Private Deposits in Bid to Calm Bank `Panic’ – Bloomberg
Iceland moves to shore up economy – BBC News

Americas
Chavez’s Cheap Oil Gives Him Sway Over U.S. Allies, Aid Funds – Bloomberg
Deflation May Be Next Threat as Commodities, Asset Markets Sink – Bloomberg
Wachovia Deal With Wells Fargo May Be Valid, U.S. Judge Says – Bloomberg
Simmons Says $300 Oil in Five Years – Beyond Fossil Fuel