This huge hoard of cash will help guarantee lending between banks and be used to take stakes in troubled financial institutions.
The initial results: Stocks are up an astonishing 936 points, with most indexes enjoying rises of 11% or more. And many tech stocks did even better: Microsoft bumped up almost 19%, Google gained almost 15%, and Apple jumped almost 14%. (Of course, these gains don't erase last week's 18% losses, and we don't know if the advances will hold.)
Overall, The rANT is impressed, but also a bit chastened to realize that the United States is increasingly becoming a bit player in the world economic scene. The NY Times quoted French President Nicolas Sarkozyputting it this way: ï¿¼Europe, a united Europe, has done more than the United States in total amounts... The time of everyone for themselves is over.ï¿¼
More to the point, though, it's also still too early to tell how this will affect the credit markets (like the Libor and the TED Spread), which remains the real danger spot. Initial indications were at least moderately positive, as the 3-month Libor rate fell to 4.75 percent Monday from 4.82 percent Friday, but that is still more than 4 points higher than the Treasure rates, keeping the TED Spread in uncharted territory. Look to see what happens to those numbers to know where this massive global effort will succeed in stemming the crisis.
You can bet business owners will be watching. According to a survey conducted last week by American Express OPEN, nearly one in five (18%) small business owners risk going out of business because of the economic climate. They survey also revealed that 63% of small business owners say the credit tightening has already has affected their business, with 79% losing sales, 51% tapping personal assets to pay business expenses, and 12% laying off staff. Almost a third (32%) believe they will have to downsizing in the future, while half (50%) say they'll have to work longer hours and cut back on marketing (52%). 58% expect lower profits while 33% say they will raise prices.
Some 55% said the US bailout would help stabilize the economy, but only a quarter said raising the limit on FDIC insurance of bank deposits from $100,000 to $250,000 will help them.
The rANT says we saw some progress today, but this ain't over yet.