I don't think people realize how close to the abyss we came on Wednesday and Thursday morning. Morgan Stanley and Goldman Sachs were about to fail. The credit markets were frozen. Other brokers and banks stopped taking assets. You couldn't move good securities from Morgan to another prime broker before it went bankrupt. There were no buyers and sellers were taking any price in the market. Money market funds were going to fail. I try to refrain from the breathless hyperbole that runs rampant in times like these, but I was truly fearful that the system was about to collapse.
Some may say that this is how the system cleanses itself and they may be right, but if everything is allowed to unwind in a haphazard way the results will affect every person in this country in a substantial way. You simply cannot take that much cash out of a leveraged economy all at once without serious consequences. Companies will not have cash to make payroll, factories will be shut down immediately, there will be no severance and no paycheck on no notice, credit cards will be cancelled, car loans and mortgages will cease to be available, home equity loans will be called in.
I'm not pretending to know what the answer is, but the problem is that serious.
and it probably will anyway!
All I know is the same crowd that brought us the problem is trying to come up with an imposed solution!
Illustrious Captains of Finance and Ivory tower economists? They are simply crooks!
Let's stop this thing before we have no legal recourse to stop it!
I believe you. I also think this is doomed to fail. It will only postpone the inevitable.
...which is why we shouldn't have been running the country the way it has been run for a long time.
Buckle your seat belt. This isn’t over. Monday should be a wild ride, much better than Six Flags.
Gold told the truth on all of yas as it shot up 90 on Wednesday and more on Thursday. That was a serious vote of no confidence in the super leveraged, derivative-addicted, Wall St house of cards
Where did anyone get the idea that free markets and libertarianism means irresponsible pigs can pile derivative bets as high as the moon
You all are being called on that
“I don’t think people realize how close to the abyss we came on Wednesday and Thursday morning. Morgan Stanley and Goldman Sachs were about to fail.”
The answer can’t be to give American taxpayer money to the worst money managers in the world.
You just hit the nail on the head. Without trying to take this out on you personally, the problem is the "leveraged" economy. It is overleveraged, and unwinding it will cause a lot of pain and heartache and require monetization of enormous piles of debt.
In that process, I don't want the same folks who profitted from creating all this leverage in the first place to further come out on top of the pile when we inject the money to deleverage.
Some folks actually lead fiscally as well as financially conservative lives. They should not be punished for their prudence all the way around.
And if it mean punishing, confiscating the wealth of, or putting high taxes on those who profitted enormously from creating this mess, well that is what it will take.
Just curious... how long ago did you realize that the credit market was out of whack?
Please continue posting on this. Your perspective is valuable and welcome.
BTW, are the junk and low grade bond markets in bad shape too? Will it be a ‘buying opportunity’ for these?
I ask because my shares in DYN Dynegy and some other leveraged energy companies took a shellacking. I heard that the spreads are pretty high.
Thanks for your post. It helps put some needed perspective on the chaos.
If I may ask I’d like your opinion on where a person invests his cash at a time like this.
Well where do the $1,000,000,000,000 dollars go? How can companies lose one TRILLION dollars, or get that far in debt?
Who actually owns our national debt? Could foreign investors come in and buy us out, and if so, what influence would they have over us politically?
You are spot on. If this deal isn’t in place by tomorrow morning we will likely see some rough sailing in the markets this week. I fear the Congress isn’t smart enough to understand the risk of market collapse. Brinkmanship!
bttt
Thank you for your insightful post. Would you agree that the unwinding of the derivatives market would cause a global depression? What do you think the odds are of this happening?