Posted on 10/07/2008 3:39:55 AM PDT by TigerLikesRooster
October 7, 2008
Doctors must stop squabbling over the patient
Gerard Baker: American view
An experienced and very senior figure in global central banking, someone not given to alarmist observations about the customarily prosaic business of his profession, described the state of the world's financial system to me over the weekend as like that of a patient who has experienced multiple organ failure.
The market for securitised assets collapsed some time ago. The interbank lending market is flatlining. The commercial paper market is shutting down. The world is in danger of losing the financial equivalent of its circulatory, respiratory and central nervous systems. Of course, the analogy is not quite right. The world economy is not about to die. How is that for good news? It is a sign of the historically dire situation we face that the fact that our economy is not, in a literal sense, going to perish is one of the few small sources of optimism we have.
This week promises to be another tumultuous and possibly pivotal one. Attention will shift once again back from elected politicians in Washington and European capitals towards monetary policymakers, and the week will be capped off, when we get there, with the annual International Monetary Fund meetings and an unusually interesting gathering of finance ministers and central bank governors in Washington.
But the turmoil yesterday again underlined the problem. To extend my friend's metaphor, the authorities are battling to stabilise the patient but are acting like a team of junior doctors fighting over whether to apply the defibrillators or try something different.
(Excerpt) Read more at business.timesonline.co.uk ...
"Mr Baker me thinks things are even beyond recovery, for the doctors are now quibbling with regard to how much plastic surgery should the dead patient receive!!"
Ping!
The American economy is like an addict who's been cruising on hydrocodone and oxycontin for about the last 12-13 years. And he's been feeling great, much better than his normal metabolism would justify.
But his dealer's been cutting back the supply for a few months now, and he's seriously feeling the effects.
Now he's at the government clinic, trying to score a few more refills......
The economy is the junky and the banks are the dealers. Their supplier, the kingpin, uncle Fed is dishing out supply left and right. The problem is the dealers are all so stoned by the product they can't function as dealers any more. So our economy goes into withdrawal. The parts that survive will be stronger with one exception: Uncle Fed needs to stay out of the economy, just an orderly shut down of insolvent banks and that is it.
This financial crisis is the typical episode of far-gone addiction. Reactions from politicians, Wall St., and many others exhibit typical reaction from junkies. They all only care about next high. What happens after that, they don't care at the moment. They just plug their wishful thinking into their future and believe it will turn out that way.
Fear of impending withdrawal and desperate quest for next high cloud any sound judgment. It does not matter how smart they are. They are all addicts now, and their judgments are all suspect.
Excerpt:
365: Another Frightening Show About the Economy
Alex Blumberg and NPR's Adam Davidson—the two guys who reported our Giant Pool of Money episode—are back, in collaboration with the Planet Money podcast. They'll explain what happened this week, including what regulators could've done to prevent this financial crisis from happening in the first place. You can learn more about the daily ins and outs and join the discussion on the Planet Money blog.
Prologue.
Host Ira Glass goes to Union Square, a 15-minute subway ride from Wall Street, where it doesn't look like we're on the edge of an economic abyss. (3 minutes)
Act One. The Day the Market Died.
Alex Blumberg and Adam Davidson recount the 36-hour period, two weeks ago, when the credit markets froze. Plus, what it’s like now for businesses to get short-term loans, and how the hardship is spreading to every sector of the economy. (16 minutes)
Act Two. Out of the Hedges and Into the Woods.
One more confusing financial product that’s bringing down the global economy. And one of way to think about this product is this: If bad mortgages got the financial system sick, this next thing you’re about to hear about, helped spread the sickness into an epidemic. These are "credit default swaps." Alex explains. (19 minutes)
Act Three. Swap Cops.
Ira talks with Michael Greenberger, a former commodities regulator, who tells the story of when it was decided not to regulate credit default swaps. And how that decision was emblematic of the way we didn’t regulate a lot of the toxic financial products we’re hearing about now. (8 minutes)
Song: "Bankrupt on Selling," Modest Mouse
Act Four. What's Next?
Ira and Adam answer the question: Was the $700 billion bailout bill signed into law today a good idea or a bad one? (10 minutes)
One of those MP3 Download Links
The general gist of all of this information is there are certain shows out there that attempt to provide helpful information. IMHO Jim Cramer is a total nut case who should have been stood up against a wall years ago. But that is the crazy, corrupt world we live in today. Profiteers and @ssclowns get all the attention by the MSM. You need to protect yourself because nobody else will.
"Words to calm the woozy investor. There's only one word for this market -- and it's on everyone's lips from London to San Francisco: "Aaaaaaaaaaaaarrrrggghhhh!" It's times like these you can't get your broker on the phone. But don't worry -- he's not avoiding you. He's avoiding everybody!" –Wall Street Journal
When the junkies are in danger of choking on their own vomit, our solution is to buy it from them. (the plan is to sell it to someone else later)
Exactly. The problem is that the junkies are the dealers.
Nice graph. Thanks for the data. The only issue I have is the effect of compounded growth. I would have expected something between a linear and a quadratic as the expected growth rate.
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