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Published on 20 Sep 2008
Friday 19 September 2008 - Investment bankers of the world, unite!
Presented by Paul Donovan
+ Thursday saw three different policies implemented in the financial crisis. The net effect is to mark the beginning of the end of the crisis for the financial system. However, the worst still lies ahead of us for the global real economy.
+ Confronted by the effective closing of money markets, central banks injected massive amounts of liquidity. Market sclerosis and central bank injections have continued today. UK regulators also moved to ban short sales of shares, which is ascribing blame to the wrong cause.
+ The end game was signalled by Senator Schumer of the US. The Treasury will come up with a plan to socialise the banking system problems by injecting capital. The structure is not clear, but the basic solution of capital injection seems set.
+ Tactically this is a positive for equities and credit, and a negative for government bonds. However, we need to remember that the real economic recovery is some way off. The process of deleveraging borrower balance sheets will still have to take place.