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The Postmodern Great Depression, Act II
Russia, two days ago, closed their stock market in the face of a
two-day decline of of approximately 27%. That market has not yet
re-opened for trading.
What can be expected next in the United States?
Today's trading on the New York Stock Exchange saw the Dow Jones Index lose 450 points.
Shares of the venerable and sole-surviving independent investment banks, Morgan Stanley and Goldman Sachs fell as much as 44%(!!!) and 27%, respectively. Morgan is doomed for sure, Goldman, most likely too.
As the logo's in the post below this one indicate, these two firms have plenty of company.
Does the USG dare halt trading? Do they dare call a "bank holiday," as was done during the other Great Depression in the 1930s? Will such actions only exacerbate the problems?
As of now, there have been no indication of a 1930s-style run on the banks taking place. The public, either because of ignorance or blind faith, has yet to line up at their local bank branch and demand their money. Right now, the first priority of the USG is to prevent such a scenario from developing.
One can surmise that the USG in concert with the Federal reserve System has realized that they cannot be the "lender of last resort" to EVERYONE.
The question now is: Who shall be allowed to fail and how can the consequences of these failures be mitigated, if at all?
What can be expected next in the United States?
Today's trading on the New York Stock Exchange saw the Dow Jones Index lose 450 points.
Shares of the venerable and sole-surviving independent investment banks, Morgan Stanley and Goldman Sachs fell as much as 44%(!!!) and 27%, respectively. Morgan is doomed for sure, Goldman, most likely too.
As the logo's in the post below this one indicate, these two firms have plenty of company.
Does the USG dare halt trading? Do they dare call a "bank holiday," as was done during the other Great Depression in the 1930s? Will such actions only exacerbate the problems?
As of now, there have been no indication of a 1930s-style run on the banks taking place. The public, either because of ignorance or blind faith, has yet to line up at their local bank branch and demand their money. Right now, the first priority of the USG is to prevent such a scenario from developing.
One can surmise that the USG in concert with the Federal reserve System has realized that they cannot be the "lender of last resort" to EVERYONE.
The question now is: Who shall be allowed to fail and how can the consequences of these failures be mitigated, if at all?
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Good to see you back Fredrick. I've been wondering why you weren't posting.
Heard a sad story yesterday. One man who'd lost confidence in the system withdrew all his meagre savings from the bank. $17,000, which he hid under his bed. He was robbed the next day.
I assume the reason people aren't pulling their savings from banks is that they're guaranteed.
September 17, 2008 6:44 PM | Reply | Permalink
Good point Fran.
http://www.reuters.com/article/bondsNews/idUSNYG00128420080917
See my most recent posts.
But what gets me is that Russia and China have lowered rates and eased reserve requirements.
While Gold did rally today I had to shake my head and think: "what part of deflation, asset destruction, and consumption destruction" had these people not heard about?
So essentially as consumption constricts, commodites fall.
Last point.. the EURO.
I'm awaiting the fallout of a euro bank where say one fails in one country, and the member countries are asked to come to rescue.
When this is all over, the deflation (the destruction of paper wealth) globally.. the people who have insured assets (FDIC) will still be standing.
To be concise.. if you were to graph the demand for the T-Note to the demand for gold.. you would see where the smart money is.
I'll also wager that some soveriegn wealth funds also get in on the act in the US. (opec dollars) when they realize that China and Russia are essentially saying: heh there is thin ice out there.. best thing to do is lower reserve requirements (make the ice thinner.)
I was irritated when I saw the suggestion to move monies among banks instead of simply name neneficiaries or inquire if the institution was FDIC insured.
Also matress stuffing leaves you at risk where if there was a fire you would be able to claim $200 of that money.
So at least suggest a safe deposit box.. laughing if you don't like banks, or if you have large amounts of gold that is NOT listed as an asset on your insurance.
I know some DEMS were happy that the economy was bad as it focused the election on 'genuine issues' where McCain was doing poorly.. but to impart unsound advice was really disapointing from Yahoo.
September 17, 2008 7:39 PM | Reply | Permalink
Fran,
Yup, you're still a sweetheart, almost too kind...if that's possible.
FB
September 17, 2008 11:19 PM | Reply | Permalink