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OK, maybe it's not quite that bad but only by a hair. Markets are in free fall and the words "Emergency Measures", "Bank Holiday" and "Martial Law" are being thrown around quite generously today. I'm actually thinking of taking a few days off from work.
Well, see for yourself:
"We may soon be hearing the declaration of emergency measures involving the allocation of food and rationing of oil"
UK Telegraph: "We face extreme danger. We risk a disintegration of global finance within days. Nobody will be spared . . ."
NY Times: Home of Wachovia, Bank of America Plunges Into the Abyss
Time Magazine: U.S. Economy in the Grip of Total Downward Spiral
Wall Street Journal: California Will Run Out of Money by October 28th
Macleans: "This is going to change the way we live for decades to come"
Economist: "Internationally, a massive run on the banks is taking place"
Well, see for yourself:
"We may soon be hearing the declaration of emergency measures involving the allocation of food and rationing of oil"
What happens here and now? To this points,events have been proceeding
under a veneer of still-just-barely-credible authority. We (as represented
by congress) have allowed Mr. Paulson to advance and activate his
remedies. As things unspool further, he will be out of credibility, perhaps in
a few days, and it's unlikely that his successor will have any either. Mr.
Bernanke has simply gone AWOL. Notice, he has vanished from the media
andscape. We may soon be hearing the declaration of various "emergency"
measures involving the allocation of food and the rationing of oil products.
UK Telegraph: "We face extreme danger. We risk a disintegration of global finance within days. Nobody will be spared . . ."
During the past week, we have tipped over the edge, into the middle of the
abyss. Systemic collapse is in full train. The Netherlands has just rushed
through a second, more sweeping nationalisation of Fortis. Ireland and
Greece have had to rescue all their banks. Iceland is facing an Argentine
denouement. The US commercial paper market is closed. The interbank
lending market has seized up. There are almost no bids. It is a ghost
market. Healthy companies cannot roll over debt. Some will have to sack
staff today to stave off default. As the unflappable Warren Buffett puts it,
" . . . I don’t think I’ve ever seen people as fearful," he said. We are fast
approaching the point of no return. The only way out of this descent is
"shock and awe" on a global scale, and even that may not be enough . . .
NY Times: Home of Wachovia, Bank of America Plunges Into the Abyss
With Wachovia dominating the south end of Tryon Street, uptown’s main
thoroughfare, and Bank of America dominating the north end, Charlotte
became the second-largest banking center in the nation, behind New York.
With the financial crisis vividly in evidence, the mood on Tryon Street was
palpably glum. Last weekend, after long hours of work trying to save
Wachovia, one middle-aged employee had a fatal heart attack. In Raleigh,
executives at RBC Bank canceled the parachuters that were supposed to
appear at the grand opening of its new headquarters, saying it was not an
appropriate time to have people jumping off a bank building . . .
Time Magazine: U.S. Economy in the Grip of Total Downward Spiral
In the case of households, debt rose from about 50% of GDP in 1980 to a
peak of 100% in 2006. In other words, households now owe as much as the
entire U.S. economy can produce in a year. Much of the increase in debt
was used to invest in real estate. The result was a bubble; at its peak,
average U.S. house prices were rising at 20% a year. Then — as bubbles
always do — it burst. The S&P Case-Shiller index of house prices in 20 cities
has been falling since February 2007. And the decline is accelerating. In
June prices were down 16% compared with a year earlier. In some cities —
like Phoenix and Miami — they have fallen by as much as a third from their
peaks. The U.S. real estate market hasn't faced anything like this since the
Depression. And the pain is not over. Credit Suisse predicts that 13% of
U.S. homeowners with mortgages could end up losing their homes . ..
Wall Street Journal: California Will Run Out of Money by October 28th
California hoped passage of the $700 billion rescue plan Friday would avert
financial disaster for the most populous U.S. state, which a day earlier had
called for a possible emergency federal loan. Its precarious financial
position is an example of how the credit crunch has spread to states and
municipalities. With credit frozen, California had enough cash reserves to
last until Oct. 28, said Tom Dresslar, a spokesman for Mr. Lockyer. As a
result, the state was prepared to seek initial loans of between $1.5 billion
and $2 billion to cover expenses including payrolls for teachers, police,
firefighters and other public employees. Mr. Dresslar said $7 billion in loans
might be needed before next spring, when new tax revenue will be flowing.
Macleans: "This is going to change the way we live for decades to come"
How painful will that bruising be? Worse than anything we've faced in our
lifetimes, Peter Schiff says. He describes a depression that would forge a
new world economic order, with sharply higher interest rates, a weaker
American dollar, surging prices and shortages of consumer basics. These
are the strains that can pull a society apart, and while not everyone
believes it needs to get that bad, such warnings are fast gaining currency
all over the world. There is no easy way out of the economic vice
tightening around America, and all the many countries, like Canada, which
rely on it for their own prosperity. Last week, with major banks failing,
home foreclosures running at a rate of 10,000 a day and unemployment
climbing steadily higher, it was clear that something big was happening.
Something that is going to change the way we live for decades to come.
Economist: "Internationally, a massive run on the banks is taking place"
At the moment, these markets are well and truly bunged up. In the words
of Michael Hartnett, a strategist at Merrill Lynch, "the global interbank
market is effectively closed." The equivalent of a run on banks has been
taking place, without the queues of depositors seen outside Northern Rock
last year. This stealthy run has been led by institutional investors and by
banks themselves. Many banks have had to be rescued by rivals or the
state. This week the Irish government felt compelled to guarantee the
deposits and some other liabilities of the country’s six largest banks.
Surviving banks have become ultra-cautious — "just taking things one day
at a time," says Matt King, a strategist at Citigroup. The effect has been
most dramatic in the overnight rate for borrowing dollars. Bank borrowing
costs reached 6.88% on September 30th, more than three times the level
of official U.S. rates, while some were willing to pay a remarkable 11% . . .