[gnm]

Maybe one of our brighter economic minds here (nods Mr Bill - and by the way thanks for many a sage post) can help me understand the resilience of the dollar on world markets. Given the mad printing of same, why has it not fallen more vs. the Euro for instance? Also why the heck do the Chinese keep buying our debt?



-G

[Ferretlover]

Requesting another lesson in Economics 101:

I don't get it! There were billions of dollars injected into the stock market last week, and, more today.
Yet, the Dow is down $3.01 right now (3:31 pm).
How can this be "calming the market down?"
What about all the billions of ARM adjustments that are due this year and next?
Has everyone forgotten about them?

And, why would everybody be printing more money to dump?
Should we be buying wheelbarrows to haul our money around in?

[Eli]

$this->bbcode_second_pass_quote('dorlomin', 'D')aft question but will injecting a couple of hundred million dollars into the market not cause inflation? I know its small beer on the volumes traded daily but its still new money....

[Roccland]

Well the DOW rolled over today...gave up all gains.

I am not convinced the "pump" passed the smell test with investors.

This is far from over.

[Eli]

Ferret it is only calming to the market in that it is holding off a much bigger equities melt down.

The Banks are running out of cash to settle accounts and transactions all their cash is tied up in very questionable debt instruments. If the Fed did not inject the float loan everyone would have to cash in equities at the same time, which would cause downward spiral of a melt down.

I have to agree with Roccland this is far from over. Trillions in losses cannot be avoided and are going to have to be written off the Fed is just trying to stem the sell off.

[DantesPeak]

It seems that most are interpreting this crisis through their recollections of a prior crisis. This is only partially correct. We have never had a chain-reaction derivative meltdown before, at least not worldwide since the 1930s. We are either in the early stage of a super crisis, or perhaps alternatively, world central bankers will attempt to sweep this under the rug – as they did for relatively smaller unrealized losses of major banks in the late 1980s/early 1990s.

The ECB has about 47.5 billion euros more repos outstanding than a week ago. (http://www.ecb.int/mopo/implement/omo/h ... ex.en.html).

This is an enormous sum. We also don't know if there are further repos between central banks or direct loans that have not been revealed by the central banks. I assume there is some in both categories. The fact that no currency, stock, or bond market has melted down yet does not mean we are out of the woods. I am somewhat miffed at the number of financial commentators that say all is well. This crisis is not about dozens of mortgage companies going bankrupt, but whether trillions $ in derivatives priced off defaulting mortgage related securities have a value, and if so, can they be traded.

[gnm]

Thanks Dante...

anyone care to weigh in on what the exposure of the big boys to the derivatives could manifest like? Are these net losses to them that would have to be paid to pension funds and the like on a regular basis? Or is this just so much "company value" which is lost? Or does it land on the heads of the investors?

-G

[Homesteader]

$this->bbcode_second_pass_quote('Roccland', 'W')ell the DOW rolled over today...gave up all gains.

I am not convinced the "pump" passed the smell test with investors.

This is far from over.

[Roccland]

$this->bbcode_second_pass_quote('Homesteader', '')$this->bbcode_second_pass_quote('Roccland', 'W')ell the DOW rolled over today...gave up all gains.

I am not convinced the "pump" passed the smell test with investors.

This is far from over.

[DantesPeak]

$this->bbcode_second_pass_quote('Homesteader', '')$this->bbcode_second_pass_quote('Roccland', 'W')ell the DOW rolled over today...gave up all gains.

I am not convinced the "pump" passed the smell test with investors.

This is far from over.

[Roccland]

$this->bbcode_second_pass_quote('Roccland', '')$this->bbcode_second_pass_quote('Homesteader', '')$this->bbcode_second_pass_quote('Roccland', 'W')ell the DOW rolled over today...gave up all gains.

I am not convinced the "pump" passed the smell test with investors.

This is far from over.

[seldom_seen]

$this->bbcode_second_pass_quote('DantesPeak', 'W')e are either in the early stage of a super crisis, or perhaps alternatively, world central bankers will attempt to sweep this under the rug

[firestarter]

I love it when the self anointed "experts" set us straight on what some around here do and don't know regarding economics. That's the same type of conceit that gave us the Noble inspired disaster of LTCM.

To paraphrase Hayek, when it comes to the billions of economic matters that are seen, not to mention the billions not seen, no one person comes close to knowing their economic ass from a hole in the ground (Kunstler's blog today says the same thing, only in a more verbose way)

At any rate, for all the condescending ones out there (you know who you are) you can take your quant and shove it!

[DantesPeak]

$this->bbcode_second_pass_quote('Gideon', 'I') have watched shows and read this and read that.

Nobody seems to want to answer the fundamental question, which I think is much more interesting than how much the Fed is pumping in.

That question is . . .

WHY are the banks unable to make loans without the Fed intervention?

They clearly either don't have the money or don't want to loan what they have.

Answer that, and where we're going becomes scrutable.

[Ferretlover]

Thank you, Eli.

Is it correct to say that 'repos' are loans that must be repaid in a certain number of days or weeks?

If so, won't that be a problem? If somebody had to borrow money short-term because they didn't have enough, how will they repay the repo thingy?

[DantesPeak]

$this->bbcode_second_pass_quote('Ferretlover', 'T')hank you, Eli.

Is it correct to say that 'repos' are loans that must be repaid in a certain number of days or weeks?

If so, won't that be a problem? If somebody had to borrow money short-term because they didn't have enough, how will they repay the repo thingy?

[Ferretlover]

Thank you, Dante.

[Eli]

Yup Ferret, Dantes and Gideon are correct this not a liquidity problem it is a insolvency problem.


The infusion of cash is keeping things moving but in the case of at least one German Bank, they were insolvent and the State stepped in to save the day. The same thing is going on in the US but we are covering it up better is my gut feeling.

Right now some major Bank has tons of paper that they have borrowed against and sold and resold and all that paper is worth nothing. That is what I think is really going on here.

The injection of cash by the FED is just a desperate attempt to keep that bank or banks from showing their hand.

[Iaato]

$this->bbcode_second_pass_quote('DantesPeak', 'R')epos are indeed short term, usually for only one day.

So those problem banks would have to return to borrow every day if they were having problems borrowing from banks, or unable to sell commerical paper.

Over time their problem could get worse, as other debts become due. So how will they repay? Good question. If you have the answer some banks in Europe want to know. More seriously, they can't, so I see see government intervention accumulating over time - although maybe not on a day to day basis.

[Micki]

Marc Faber, a.k.a. Dr Doom, speaks out in Bloomberg.
Besides a few punches that made me laugh out loud, he mentions COLOSSAL recession as a sure thing.
He has been warning about this for a while and long time ago started suggesting investors divest into gold already some years ago (wrote a book called "tomorrows gold").
He however suggest commodity prices in general are likely to come down and that US$ can find some support as emerging markets start loosing out more, relatively speaking, than US.

Marc Faber at Bloomberg