Baseball91's Weblog

February 11, 2009

Game of Shadows

Filed under: Business,Money — baseball91 @ 2:54 AM
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Trends. Business trends are so evident. About the dollar’s movement in currency markets. About falling index averages.

“Today indirect bidders, a class of investors that includes foreign central banks, bought 44.8% of the sale, the highest proportion since 2004, indicating strong demand from investors. Treasury Department sold a record $32 billion in three-year notes today to yield 1.419%, the first tranche of the biggest quarterly sales of notes and bonds on record,” reports Marketwatch.

This is a financial system crisis, not a sub prime mortgage crisis. It was not just the derivative market. It was the entire system. It was everybody. Here …. in England. The crisis is not going to go away.

The U.S. dollar strengthened against all but five of the 16 most actively traded currencies today. If you wondered why, in the UK, Gordon Brown and Treasury Minister and Chancellor of the Exchequer, Alistair Darling, on Monday filed a second rescue plan. Willem H. Buiter wrote on January 25, 2009, its impact has been virtually nil in the market which has continued to punish the banks in the stock market, and among the public, which has failed to find a clear message. And above all, because the market’s reaction suggests that perhaps even the government is able to guarantee the future of British banks.

“In the UK there is no bank is solvent. And if there is, I do not know,” also said Jim Rogers.

The crisis in the banking system has been accompanied by the collapse of the pound sterling, which traded at two U.S. dollars a year ago and on Friday paid $ 1350, the lowest change in nearly one quarter of a century. The pound has been pegged for years to 1.5 euros and is now on the verge of parity with the European currency. Its weakness is a combination of several factors: interest rates are on the floor and is expected to fall further, the housing market remains in crisis, the current account deficit is through the roof, economic prospects are very bad, it was have triggered the red in the public accounts and banking turmoil of recent days have come to weaken the currency.”

Saved banks….but banks not fixed. As a result of big banks in too many businesses, this republic is threatened. The scale of the problem. Bloomberg has reported the total bailout and loan guarantees, the stimulus, total $9.7 trillion now – enough to pay 90% of all US home mortgages. This was not just sub-prime crisis. A calamity was a lot like fire. People cannot buy homes and cars from a banking system where half of the banks are on the brink. And the rest of us cannot sell.

Trends. Business trends are so evident. Deflation could be seen in the price of oil, or in the strength of one currency over all the rest.

Deflation was in the news from China this week. In China, consumer prices were expected to decline further in coming months, Marketwatch wrote yesterday. Did they edit “deflation” out of the headline?

“Merrill Lynch’s Ting Lu said there were few risks of sustained deflation in China this year. Prices would be supported against a backdrop of loose monetary policy, the removal of some price controls, ramped up government spending, and commodity prices that appear set to rally off lows. The broker defined deflation as a persistent decrease in the general price level of goods and services lasting for a prolonged period.” China suffered deflation for two years ending in 1999 following the Asian economic crisis and for about a year ending in 2003.

The down side. Government and banks feared deflation. For banks, holding cheaper assets, in default. Government taxing failing properties. Banks, not liquid. With no value. A little more than half the banks. The big banks.

So act. About commercial paper. Paying off all debt. Before the next calamity. This week. The Great Gatsby was THE great American novel. Wealth polarizes. You learned that traveling in a poor 3rd country. The rich are afraid of the poor. It has nothing to do with race, color, or creed. That September 11th event. It was all based on wealth. Striking at Wall Street. Striking the Pentagon.

We had lived through times when banks quit playing for the community. When Citibank arrived. And put that local banker out of business. And then put their name on that new stadium replacing Shea Stadium.

We were getting nothing these days but stories about the economy. They were cheap stories to cover. And the rich, because they were worried, were tuning in. The message was always directed at the rich. People treated those with money differently.

The image of baseball was tarnished again this week. By the same atmosphere that had tarnished Wall Street. Executive pay. And super stars. Giving limited access to the press, everyone survived. People always treated those with money differently .. With more reverence.

Saved banks….but banks not fixed. The scale of the problem. Bloomberg has reported the total bailout and loan guarantees, the stimulus, total $9.7 trillion now – enough to pay 90% of all US home mortgages. This was not just sub-prime crisis. A calamity was when people cannot buy homes and cars with a banking system where half of the banks are on the brink. And the rest of us cannot sell homes.

As a result of big banks in too many businesses, this republic is threatened. Our existence. The system was non-viable when the majority number of banks are insolvent. The nation’s capital. It was now about the taxing power in Washington, and not the city.

Behavior modification was to come, in tax policy.

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1 Comment »

  1. Comment by baseball91 — February 12, 2015 @ 6:08 PM | Reply


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