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Are worldwide money markets still the key to recovery?

After a brief period of confidence in the UK and worldwide economies, the last couple of days have seen a significant injection of realism into the arena. More and more companies and more and more financial institutions around the world are suggesting that money markets are the key to recovery and so far they have not responded as hoped.

In simple terms, until there is a return of confidence to the UK economy there will be limited funds available to only the most blue-chip of borrowers. As a consequence it could prove more and more difficult for companies such as Royal Bank of Scotland, which is due to refinance £300 billion of short-term debt over the next month, to refinance debt positions on similar terms to their original deals. It is literally a chicken and egg situation in that confidence needs to return to economies before money markets respond while economies need money before they can turn the corner.

As a consequence, we have seen governments around the world attempt to inject confidence and funding into the money markets as a short-term boost in the hope that natural lending would grow and takeover. So far it has not happened but there are signs of a slowing rate of decline in the worldwide economy and still hopes of a recovery next year.

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