Black Thursday? Market Bleeds Out to a Red October

-by Gayle Plato-Besley
 
Like a drug addled teen stealing Mom’s wallet, the multi-country public financing of corporate bail outs grabs our money without thought or remorse.  Today we hear it’s The U.S. Government, China, Japan, and nearly all central banking groups of the free world market. As stated at FOX Business website,

The European Central Bank said that it had joined with the Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan and the Swiss National Bank to pump more short-term dollar liquidity into the financial system.”

Will this be Black Thursday?  There’s an uptick of futures for the open in less than an hour of this post, but that is not it.  According to Stuart Varney of FOX News,

Overnight the lending markets seized up… this week the US Treasury sold 40 billion in to fund the Reserve.”

Realize this, $370 Billion was dumped into the world markets this week.  What does this mean? No one will be borrowing money and there is no amount of bail out to save this.  The World Market is like that drug addict kid- you love him and want him to get though it all, but until he stops taking and using… You know he must stop or he might not make it.  It’s tough love time. Unfortunately, the trickle down to all of us, might be a flash flood this time.
 
It’s about loans and no one can get one.  It’s about the psychological effect and how your job at your company might be pink slipped.  Heck your company might be pinked.  Now, can we really afford absolute market killers of more taxes?  Can each one of us take on the flood of growing central government, charging the bill to us?
 
So as President Bush prepares to speak today after clearing his schedule to deal with the economy woes, get yourself educated real quickly as to how liquid you are.  Is your wallet half full or half empty?  Think it’s all gloom and doom?
 
How’s your house value compared to 18 months ago–heck even 3 months ago?  Your greatest asset is your home and the biggest loan most of us  have is the mortgage.  Are you ready to pay in full if it were called?  Hmmm.
  
Keep hope alive.  Reform… Change…
 
Personally, I want more than some Change in my wallet.  It may not be Black Thursday, but whether today or tomorrow, it is Red and the financial lifeblood is bleeding out.

UPDATE: Nancy Pelosi is blaming the President and John McCain for the financial crisis while Mr. Barack Obama pulls economic advice out of the brains of former Fannie and Freddie heads. Comment by John McCain:“ ‘He talks a tough game on the financial crisis, but the facts tell a different story,’ McCain said at a rally in Vienna, Ohio. ‘Senator Obama took more money from Fannie Mae and Freddie Mac than anyone but the chairman of the committee they answer to. And he put Fannie Mae’s CEO, who helped create this problem, in charge of finding his vice president. That’s not change, that’s what’s broken in Washington.’(Boston Globe)


Comments

  1. I am in New York and on Monday had lunch with my godson who is CFO of a hedge fund (and consequently about 10,000 times richer than I am). We were walking in the Financial District and I said no one was jumping out of windows. He said, “Nobody knows enough to do that yet.” The word I keep hearing in Manhattan is “unprecedented.”

    But the central banks seem to be following the lesson in Milton Friedman and Anna Schwartz’s monumental Monetary History of the United States, and from its central chapter on the Great Contraction. The policy recommendation is simple: central banks have a responsibility to not allow a bank collapse to be followed by a deflationary monetary contraction.

    It’s just that with deregulation, now some of the “banks” aren’t quite banks. They can be, as we learned yesterday, insurance companies. They can probably be other things.

    The era of small government is over.

  2. And the reason they’re not just banks?

    The idiotic 1999 Gramm-Leach-Bliley Act, which repealed a Depression-era law specifically designed to avoid this type of meltdown.

  3. We’ve become disconnected from our moral roots. When you believe in an amoral worldview connected to a ‘disregulation’ philosophy of government you reap what you sow.

    There is a reason we have historically believed in some regulation. People are not ‘inherently good’ and working for the common good. Our national naivete has been exposed.

    The Gramm-Leach-Bliley Act of 1999 was the public policy expression of our belief that all parties would act for the common good. The chickens are coming home to roost.

  4. And that update might have resonance if McCain hadn’t had the man who orchestrated the Gramm-Leach-Bliley Act (Phil Gramm) as his chief economic advisor until Gramm showed his contempt for the American people and had to be thrown overboard.

  5. Dear Klute,

    Keep Hope Alive Sir…FANNIE/FREDDIE TANKERS-
    1)Chris”Countrywide” Dodd
    2)Barack “Change Ranger and Resko Clinger” Obama

    Obama Lama Ding Dong shouldn’t be ‘ gettin’ in the face” of anybody right now.

  6. I’m sorry, Chris Dodd is on the ticket? Did the Large Hadron Collider in Geneva propel me into a paralell universe?

    Republican nominee John McCain has taken $16,400 from Freddie and Fannie employees since 2005. McCain campaign manager Rick Davis is past president of the Homeownership Alliance, an advocacy group whose members included Freddie and Fannie. In that role, he defended the companies against increased regulation.

    But tell me more about mooseburgers… in this time of financial crisis, I want to know that my potential president knows how to “Kill it and Grill it!”.

  7. George of the Desert says

    Klute:

    The super-collider must have switched the earth’s polarity because I agree with you to an extent.

    The 1999 bill that allowed financial institutions much more latitude in operating in the investment market is largely to blame for this week’s troubles.

    Blame can be handed to each party. The GOP congress saw the bill through and Clinton signed it into law, ostensibly with his Treasury Secretary’s blessing.

    This is a reminder of one of Reagan’s few domestic blunders (which was also a bi-partisan blunder since Congress was in Dem hands at the time). That is, the Garn-St. Germaine bill that allowed S&Ls to invest in land speculation, etc.

    In both scenarios, financiers went to the government to ask that regulatory shackles be removed. The public goal was to maximize shareholder wealth by allowing previously stodgy financial institutions to make lotsa money for shareholders.

    The unspoken goal was to make Wall Street gurus richer than Croesus.

    In both cases, shareholders and gurus got rich, but largely on the promise of unimpeded growth in the real estate / homeowner markets. Growth is good, but it does slow down, and it goes through spurts. Reasonable regulation forces banks, etc., to make better decisions and, frankly, helps to keep greed in check.

    As for McCain’s involvement financially, o.k., you’ve made your point. But Obama has taken more campaign money from Freddie Mac and Fannie Mae than any other candidate.

    We can get partisan here, but my take is that people from every spectrum of the political prism are prone to the lures and pitfalls of massive wealth.

    We’re all paying for that, now.

  8. George,

    And I agree with you – this is a bi-partisan mess. Clinton was a gutless coward when he signed this into law. A child (well, a first-year economics major, anyway) could have seen the negative impacts of this law, especially with the S&L deregulation fiasco before it.

    Ron’s point about people not being inherently good shoudl be heeded – libertarianism and communism both suffer from that inverse boneheaded flaw. You have to teach children to be good: to not steal, to not cheat, etc. Government may not be the best parent in the world, but it’s better than an absentee one.

    I also won’t deny Obama took more money from Freddie/Fannie employees ($112,000 I think), but as the LA Times notes (where I got the previous info) that could be related to the fact Obama is fundraising more from the public sector, but there’s a difference between taking someone’s money and having the mechanics of this particular catastrophe drafting your economic philosophy.

    In any event, I’m starting up a new company: Amalgamated Hobo Bindles, LLC. I’m on the ground floor, people.

  9. Beyond the criminal stupidity of repealing the Glass Stiegel Act, which was a bi-partisan affair, as most bad ideas are, there is a much more fundamental question to take from the last few weeks.

    Is it actually in the interest of a society to allow financial institutions to be so large and so central to the economy that their failure can not be allowed. Frankly, for deposit taking banking, what is the justification for it to be under private ownership when they could not exist but for deposit insurance and lender of last resort which are backed up by taxpayer money. Could there be a situation more ripe for promoting behavior so stupid and risky since it is the extreme example of privatizing profits while socializing risk.

    I wonder, what exactly is the argument for trusting the private sector with these types of financial institutions in the way we have in the past.

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