Posted on 09/24/2008 3:48:06 PM PDT by Brian S. Fitzgerald
The Fed has claimed that this is a "liquidity crisis."
Really Ben? Then perhaps you can explain this?
Note that this is an intentional drain of "slosh", or liquidity, from the banking system. $125 billion in the last four days drained?
You wouldn't be trying to intentionally cause a bank failure or two to bolster your call for the $700 billion "bailout" plan, or perhaps intentionally lock the short-term credit markets, would you Ben?
If the market has a liquidity crisis, why would you be intentionally draining reserves from the banking system? Don't you think you ought to explain that to Congress?
The timing is highly suspicious.
Is there somewhere we can compare those drains to say..drains at the same time last year? Not sure we need to get excited over one graph captured in time.
There are probably legitimate explanations for this - check Denninger’s site -
sometimes he’s meloddramatic.
http://krugman.blogs.nytimes.com/2008/09/24/a-sneaking-suspicion/
September 24, 2008, 5:56 pm
A sneaking suspicion
So now the whole rationale for the plan is “price discovery”: we’re going to throw lots of taxpayer funds into the pot because that will let us find the true values of troubled assets, which are higher than the fire sale prices out there, and so balance sheet will improve, confidence will return, etc, etc..
So I just did a Nexis search trying to find out when Paulson and Bernanke started talking about price discovery, which we’re now told are at the core of the plan’s logic. And the answer is …
Yesterday.
I can’t find any use of the term, or even a hint of the argument, until yesterday’s Senate hearings.
One possible explanation. It wasn’t until yesterday that they realized that it would actually be necessary to explain themselves.
But there’s another possible explanation, which I find terrifyingly plausible: the plan came first, and all this stuff about price discovery is an after-the-fact rationalization, invented when people started asking questions.
It has seemed very strange to me that such a supposedly crucial economic program would be based on such an exotic argument. My sneaking suspicion is that they started with a determination to throw money at the financial industry, and everything else is just an excuse.
Read up on the “panic” of 1907 - that’s not the FED in those figures, that’s the member banks withdrawing out of New York.
Why? Because depositors are yanking their money out of their local banks. Normally they keep about $2 billion on had for withdrawals. Last Wednesday, I think it was, 114 billion was withdrawn from money markets and such.
Not all of that went to cash obviously, it went to another bank, thankfully. But that’s what’s going on.
I see the debt.-riddled, import-crazy constituents and their paid congressional garbage flailing at everyone else in efforts to keep their game going. Constituents with both parties are pushing against any plan to limit projects to those backed with real, existing money. But banking is already reorganized at the top for deposit banking only.
Make my day. Scare the investors away again, and let’s have a depression.
There needs to be some better kind of charts to show these withdrawals and this "credit freeze" we keep hearing about.
J2P is not impressed with the anecdotes and scare talk.
KRUGMAN? I would not read anything that idiot wrote...sorry...LOL. Can’t stand him!!
have you watched any of the hearings? they want the Feds to buy the toxic assets at book value, not market value.
What do you make of this? Do you have other charts to compare?
Interestingly the FED accepted $105B on 9/18 most of which matured in 1 day, and it looks like they are draining liquidity now.
I agree Brian. Denninger is the best when it comes to explaining complex market matters, but he can be a drama queen, and I can’t say I like the guy.
I don’t see a smoking gun here—there’s no metadata here, and I think he’s on one of his jags again.
He lost me when he posted a video saying that Republicans are liars, so vote democratic. He has a lot of kool-aid drinkers on his forum who’ll probably listen to him.
Denninger, if you read this, ALL politicians are liars, dammit, grow up. I’m voting for the next Supreme Court—all else pales in comparison.
“they want the Feds to buy the toxic assets at book value, not market value.”
Unbelievable.
I think Krugman is on to something.
Foreign central banks have been pumping money into the system as well, and now there is too much.
I don't think he is intentionally trying to make the system seize up, so much as Bernanke doesn't know what he's talking about and just parrots whatever the Wall Street CEOs and Hank Paulson tell him. The market has zero respect for Bernanke. We see him as an utter and complete joke with no credibility.
Price discovery doesn’t require $700 billion. Maybe $200 billion would do. All you need to do is start getting some trades going, and all of a sudden, once prices begin to be discovered, the private markets will swamp in, seeing profit opportunities, and you can sit back and watch.
Thanks for the link. Will definitely check it out after the speech.
So wait for the peer reviewed study?
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