ECB Cuts Rates, Prepares To Contain Damage To Credit Markets

The European Central Bank cut it's deposit facility rate to -0.1% in an effort to get banks lending again.  The bank also made a decision to cut the main refinancing rate from 0.25% to 0.15%, along with the marginal rate being reduced by 35 basis points to 0.4%, in an effort to fend off falling inflation and spur economic activity. The ECB declined to use it's most powerful tool, LTRO (Long-Term Refinancing Operation), and chose instead to cut rates while acknowledging their awareness of the presence of LTRO. The Central Bank "also opened a 400-billion-euro ($542 billion) liquidity channel tied to bank lending".
By charging clients to hold money, the ECB has effectively stripped out the risk/reward involved in holding cash and seems to be pushing the banks into a state of lending designed to help credit markets, though the action by the ECB will have the opposite impact, resulting in a deterioration in credit markets as more players attempt to siphon profits off lending rates or through other aggressive banking practices. As noted by Bloomberg News "that’s because banks, trying to preserve their deposit bases by paying customers a reasonable interest rate, may reduce lending to companies and households because the return is too low and invest in higher-yielding assets instead".
What the move appears to be doing is to spark lending and spending while at the same time prepare to begin buying asset-backed securities in an effort to drive up equity prices to allow collateral to increase in value so that those banks who are paying negative deposit rates can comfortably lend to less credible clients while still turning a profit.
And as has happened in the US, the increase in borrowing will put us all back in the 2006 position of over valued assets driving lending which is maintaining economic activity but as long as asset prices only rise and never contract. It's really quit bizarre to see the global financial markets come back to these embarrassing low-rate policies as a means of economic expansion ignition, something that failed miserably last time. 

Surely the party line of "this time is different" will continue to prevail and be repeated without any appreciation of the nearly-fatal balancing act the two biggest global central banks think they'll manage while the two others, the Bank of England and the Bank of Japan, attempt to tighten their policy of loose capital furthering lodging the monkey-wrench of managed markets into the global "free-market" system.