” Apparently, no one, neither the general public nor professionals on Wall Street, has yet to realise the extent of the hole, a hole of 20 trillion dollars with no market, nor value.”
a lot of folks on the street are very worried about this. The CMO trader I work with is convinced more bad news is down the line, but psychologically the market put in a short-term bottom a few weeks ago and I guess it takes either time or something particularly nasty to take it back down again.
Yes, it’s striking me as weird, and a bit worrisome, that everyone who has a clue is absolutely certain that a huge drop is on the way very soon. And yet it just keeps not happening. Mortgage derivative hedge funds go belly-up, CP markets freeze up, one money market fund failed to honor redemptions, a British retail bank has customers lined up at dawn to make panic withdrawals despite British Central Bank assurances that this isn’t necessary, and yet the stock market keeps toddling along as usual. This has gone on long enough that I’m starting to get seriously perplexed. I bailed out a while back, with the S&P just a hair over 1500, and I’m just sitting back waiting for the show to start. But it’s taking an inexplicably long time to start.
It seems to me that Ben Bernanke has made it possible for the hole to be plugged at the discount window.
Your friends have the option of bringing their worthless paper to that window and getting cash at 5.25% in exchange.
Ben has made the market. So what’s the problem other than a slight dollar devaluation?
The problem is with your friends who after holding the worthless paper and trading it for cash, decide to deploy that cash in future worthless paper.
History repeats itself.