What Did the Central Banks Do Today? A Second Opinion

     In my earlier post I was pretty jazzed about whatever it is that they did do. I noticed that the markets were all up and while I understand that this in a sense proves nothing-as equity markets know nothing about this sort of thing anyway- I had this seal of approval to monetary head cheerleader Scott Sumner:

    "It’s much too little, but not at all too late."

      "The participation of the central banks of Canada, England, Japan and Switzerland is more of an effort to show that all the central bankers are working together than any expectation that there will be lots of dollar borrowings under their facility."

          http://www.themoneyillusion.com/
         http://diaryofarepublicanhater.blogspot.com/2011/11/worlds-central-banks-unite.html

       So Sumner did say something about Treasuries-which do matter even if equities don't so much. Yet here is Krugman:

       "I’ll outsource this to Mark Thoma

       "I am, I have to say, somewhat mystified. Of course the Fed will make dollar liquidity available to other central banks as needed; that was never in question, because Bernanke doesn’t want to be the man who destroyed the world to save a few pennies. And reducing the interest rate on those loans seems to me to make virtually no difference; it was a trivial charge anyway."

      "So this looks to me like a non-event. Yet markets went wild. Are they taking this as a signal that substantive actions — like the ECB finally doing what has to be done — are just around the corner? Are they misunderstanding the policy? Was this cheap talk that nonetheless moved us to the good equilibrium? (If so, not enough: Italian bonds still at more than 7 percent)."

       "A very strange day."

        http://krugman.blogs.nytimes.com/

       Obviously Sumner sees things differently than Krugman and Mark Thoma. Still whatever exactly the Fed and the other central banks did which sounds good to me much like it did to the equity guys, the private ADP numbers were good, and that was enough to make the markets feel good for one day at least.

       I get Krugman's point about what we need to see out of Italian bonds. Yet what about that Treasury action Sumner mentioned? Still today's market move was a wow-it finished up almost 500 points even if equity guys don't know anything. Indeed what I do know is that if you were long going into today's open you made a lot of dough. Beyond that we'll have to "continue to monitor events."