Here comes your "coordinated action"

The major central banks of the world are joining hands to loosen up the credit markets — a great global liquidity injection.  And so begins the "coordinated action" described in an Economist article we highlighted last week.

As a rule, central banks cannot intervene to determine exchange rates, but as Morgan Stanley's Mr Jen suggests, some sort of official action has often preceded turning points in the world's foreign-exchange markets. If he is right, then a change in rhetoric or even co-ordinated intervention may be the signal the markets need before they stop believing that the dollar is destined to fall further.

Of course, "fall further" is a relative term in what's now shaping up to be a race to the bottom among the world's major currencies.  The timing is remarkable, coming less than 24 hours after the Fed made its quarter-point cut and the Dow promptly tanked 200+ points.

I suspect we'll know how serious this "coordinated action" will be when the European Central Bank meets next to set rates.  For now, the ECB is talking out both sides of its mouth — sounding alarms about inflation just hours after taking part in the great global liquidity injection.