Posted on 10/10/2008 6:53:33 PM PDT by TigerLikesRooster
October 11, 2008
Lehman Brothers demise triggers huge default
Tom Bawden in New York and Suzy Jagger in Washington
Lehman Brothers, the bust investment bank, triggered one of the biggest corporate debt defaults in history yesterday as it emerged that the US Federal Reserve is harbouring grave concerns about whether Washingtons $700 billion (£413 billion) bailout fund will avert a financial meltdown.
An auction of Lehmans bonds yesterday determined that the banks borrowings were worth only 8.625 cents on the dollar. The valuation leaves the insurers of the debt a bill of about $365 billion. It is not clear whether the insurers, which are required to settle the bill in the next two weeks, will be able to pay a development that could further undermine increasingly stressed capital markets.
The $365 billion default came as stock markets around the world suffered one of their worst days since the crash of 11 years ago. Panicking about the prospect of global recession, the FTSE 100 index of leading shares in London crashed within seconds of opening, losing 8.9 per cent of its value, its worse fall since October 1987.
The index recovered to close down 225 points, marking a 5 per cent decline, but more than a fifth was wiped off London shares this week alone. Issues in New York fluctuated wildly as the Dow Jones industrial average slumped by 312.14 points at lunchtime before closing at 8,451.19, down 128.00. Both markets had been scared by losses in Tokyo, where the Nikkei lost 10 per cent of its value.
(Excerpt) Read more at business.timesonline.co.uk ...
The Black Market is likely the only market functioning correctly.
Governments attempt to grow economics by making credit cheap.
Bad move this time by the 'experts'.
A country's economy can grow by increases in population that in turn increase demand for goods and services....more money changing hands.
However, new jobs, that are actually productive and are sustaining, i.e. not government jobs, must also increase with the tax burden remaining the same, most importantly in the short and mid terms.
If the latter isn't the case, the actual improvement in the overall standard of living cannot occur, therefore, no real growth in the country's economy. All other employment (jobs) are created from from the net gains of domestic product development, product manufacturing, coupled with raw material extraction, refinement, and distribution to include food and food products. Government, retail distribution and service sector employment all are built upon this foundation (hard industry).
A country like UAE invests in the known fact abroad, they usually makes good returns of such.
If we look at the continued courtship of contracts and ownership of foreign governments with other countries raw materials to fuel their domestic industries, we can understand that basic economic principle. From that we also can see the significance of domestic construction industry tied that function.
Funny how the 'experts' dream up 'new' economies omitting that basic foundation. Even if a small country is a travel hot spot for vacationing, and that's their main economic stimulus, they are still depending on other countries for that base foundation to function efficiently with those foreign countries' abilities to manage real growth.
Most of the goods are imported as well as lots of food and raw materials.
America becomes NYC, Chicago, LA, and a few more metropolitan regions, along with Midwest corn/soybean field and a dozen rivers for cities' water need.
That is a great explanation. Business hates one thing more than hard times, and that is inconsistency. What kept the Depression so bad was the government’s unpredictable decisions.
You can imagine the mentality inside the banks. No one knows what to expect and so they play safe.
I wonder how many pension funds and insurance companies had money in that House of CarDS. A sobering thought.
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