Short-term interest rates continue their downward trek.

The effort by major central banks to increase the supply of dollars globally to free-up credit continued to move rates in the right direction Thursday -- down -- as private banks were encouraged by the U.S. Federal Reserve's interest rate cut and $120 billion in new swap lines with emerging market central banks.

The London rate for three-month loans in dollars declined for the 14th consecutive day, dropping another 23 basis points to 3.19%. Rates also fell in Asia: the three-month rate for Hong Kong, the HIBOR, dropped 15 basis points to 3.39%.

Meanwhile, the London interbank overnight rate, or LIBOR, plunged another 41 basis points to 0.73% - - its lowest level since January 2001.

Short-term rates, including overnight rates, are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, very high overnight and short-term rates will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.

Bloomberg News reports that in the latest effort to prop up global stock markets, the Fed coordinated with central banks around the world to pump $180 billion into the financial system. This move reversed stock markets' 8% slide, leading to a small recovery. Specifically, the Fed got together with the European Central Bank, the Bank of Japan, The Bank of England, the Bank of Canada and the Swiss National Bank to make $180 billion more available to the markets.

Once again, the 100 Year Crash is exposing to the public parts of the financial system of which it had not been previously aware. The most recent new area is Credit Default Swaps (CDSs), which Phil "Americans are Whiners" Gramm, chief economic advisor to John McCain, helped expand. Today's lesson is what the New York Times calls "temporary reciprocal currency arrangements." These are also called "swap lines" and they allow banks "to borrow more dollars in markets at a lower rates," according to the Times.

It is these swap lines that are providing the source of the new dollars. I have never seen this kind of central bank action -- and it makes me wonder: Will central banks need to inject $180 billion a day to halt these knife-dagger plunges? Will they need to inject more every day to have the same effect? Won't all this extra currency cause the value of the dollar to plunge and drive inflation out of control?