Explaining the Financial Markets Crisis

A great segment from the Long Johns explaining Structured Investment Vehicles -- an integral part of the sub-prime mortgage debacle.

Fed makes emergency move

The Federal Reserve, in emergency decisions aimed at containing a crisis of confidence in the U.S. financial system, cut the rate on direct loans to commercial banks and opened up borrowing at the rate to securities firms.

The moves, coming in an announcement timed for the start of trading on the Tokyo Stock Exchange, included commitments to encourage JPMorgan Chase & Co. to buy Bear Stearns Cos. after a run on the firm threatened the stability of global markets. The Fed also extended the maximum term of loans to commercial banks to 90 days from 30 days.

A favourite topic: Oil breaks a new record

This week saw a new record high for oil prices -- here's how it got there?

Fed slashes rates in shock move

The US Fed has cut interest rates to 3.5%, a shock three-quarters of a percentage point reduction. This was an emergency move, used for the first time since 2001 after stock markets tumbled from Hong Kong to London and the U.S. economy showed increasing signs that it's headed into a recession.

However, despite the attempt tostave off a US recession, the move failed to calm investors, with shares continuing sharp falls as Wall Street opened for trading today. This recession is already called the worst downturn of the post-war era.

C$1.10/US$1, Oil close to $100/barrel

Crude oil rose above $98 a barrel in New York for the first time on speculation U.S. stockpiles fell for a third week and as the dollar fell to a record low.

The US$ declined to its weakest ever result versus the Canadian dollar since the end of a fixed exchange rate in 1950.

Canadian Dollar on par with US$

For the first time in 31 years, the loonie (C$) briefly touched on parity with the Greenback, capping a spectacular run that has seen it rise 62 per cent since 2002.

The loonie briefly reached $1.0003 US on foreign exchange markets shortly before 11 a.m. ET, the Bank of Canada said. The loonie spent much of the rest of the day flirting with parity and closed at 99.87 cents US, up 1.37 cents from Wednesday's Bank of Canada close.

Fed surprises with half-point rate cut

The Federal Reserve Tuesday surprised financial markets with an aggressive half-point cut in a key lending rate, lowering borrowing costs for businesses and consumers in response to a housing downturn that threatens to spread to the broader economy.

'Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time,' the Fed said in a statement. The central bank cautioned that 'the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally.'