Crisis heat at ocean of cash The USA are ready to fill up world banks with cheap dollars

The real result of the financial summit of countries G7 has been declared only yesterday: since October, 13th ФРС, the European Central Bank, Bank of England, Natsbank of Switzerland and Bank of Japan will grant banks at auctions on a flat rate dollar liquidity for the term up to 84 days in unlimited volumes till May, 2009. For the first time in history work in the conditions of complete failure of regulators of any monetary policy is necessary to a world financial system.

The final statement of Ministers of Finance of countries G7 about the new co-ordinated measures of financial regulators of the largest economy of the world on struggle against a financial crisis is deciphered only yesterday (the meeting passed on October, 11-12th). The Federal Reserve System of the USA (ФРС), ЕЦБ, the Bank of England and Central Bank of Switzerland declared removal of any restrictions on liquidity granting in US dollars to national banking systems till April, 30th, 2009. Several hours later the Bank of Japan has joined the application on similar conditions also.

Already yesterday all five key Central Banks of the world declared the first auctions without restrictions on the sum. On October, 14th for the term up to seven days will conduct credit mortgaging auction Bank of England, on October, 15th — for the same term banks of Switzerland and Japan, ЕЦБ this very day begins the program of weekly auctions for week term. This week all five countries declare additional auctions for terms 28 and 84 days. Rates at all auctions will be declared the day before their realisations and will be fixed.

Before the Central Bank of five countries conducted dollar auctions with various restrictions under liens of assets, with the floating rate, but always in the limited size. So, the last long-term dollar auction conducted Natsbank of Switzerland on October, 7th on $4 млрд with credit injection term for 88 days with a minimum charge of 1,39 % annual, short-term — on October, 10th for four days under the rate from 2,4 % annual. ЕЦБ declared that will conduct the similar auctions, doing unlimited the offer of dollars in EU (so, EU banks have possibility to participate in tenders and ЕЦБ, both in Switzerland, and in Great Britain), «at least till January, 2009». The spectrum of the instruments will be simultaneously expanded, allowing to compensate inflow of dollars in "the eurodollar" markets. But the monetary policy of all Central Banks of the world was under construction till now on restriction as supplies of liquidity, and rates, now the fixed preauction rates became the unique instrument of regulation of refunding in dollars.

Theoretically the decision to expand possibility of bank refunding in key economy of the world indefinitely could be read and in the application of the Ministries of Finance of countries G7 following the results of meetings in Washington. In the application extended on night on October, 13th, G7 speaks about the plan from five items, in which the first item offers «to use any present means not to admit crash it is system the important financial institutions». However with unlimited refunding of a banking system all over the world economists obviously did not expect experiment. The head of department of strategy of insurance group Standart Life Andrew Milligan has declared that this decision is "much more important", than the joint decrease undertaken on October, 9th by Central Banks of interest rates. From summit G7 continuation of this policy — the adjusted decrease in rates on 0,25—0,5 % expected on October, 15th. To assume that the world financial system will be transferred in essentially other mode of operation, anybody could not. The decision was kept a secret, it was mentioned yesterday in the morning in several performances even by one of authors of idea — the Minister of Finance of the USA Henry Polson.

In the USA time recutting of world financial architecture has been evaluated by the market immediately: at market opening on October, 13th index DJIA has opened a jump upwards more than on 5 % and by the evening across Moscow was in the order hardly below 9000 items. We will note, financial summit G7, obviously, has developed a part and other not declared measures on rescue of financial systems which will be realised at national level. Probably, they will be declared after the next summit of Ministers of Finance any more G7, and G8 in Tokyo on October, 24-25th. Then "seven" can evaluate the first consequences of the decision which cost now is difficult for predicting (in 2008 ФРС has granted Central Banks of the world of $620 млрд, the sums of liquidity which will be thrown out at unlimited auctions, possibly, will be comparable), and also its effect on world inflation and rates of bank crediting to the USA, EU and Japan.