Fewest Treasury Traders Since 1960 Hit Taxpayers

[Pale Blue Dot]

Source: Bloomberg

Taxpayers already are reeling from the highest unemployment rate since 2004 and the worst economy since 2001, a slump that was caused partly by the collapse of confidence in the fixed- income market. Bond investors who readily provided financing for everything from subprime mortgages to high-yield, high-risk companies 18 months ago, cut their credit lines last summer in a relentless reduction of money lending.

Four of the five firms reporting the biggest credit-market losses since the start of 2007 -- Citigroup Inc., Merrill Lynch, UBS AG, and Bank of America -- are dealers. Sixteen have lost a total of $266.9 billion as the U.S. housing slump roiled financial markets, according to data compiled by Bloomberg.

Yields on the current benchmark 10-year note fell 17 basis points last week to 3.93 percent, the most since the week ended June 27, according to New York-based BGCantor Market Data. The 3.875 percent security due in May 2018 gained 1 10/32, or $13.13 per $1,000 face amount, to 99 17/32.

Almost all of the firms that were dealers when the Fed formalized rules in 1960 have changed their names, been acquired by other securities companies or gone out of business. First Boston is now part of Zurich-based Credit Suisse Group; Salomon Brothers is now owned by Citigroup in New York; and PaineWebber Inc. is owned by UBS AG, also in Zurich.

Read more: http://www.bloomberg.com/apps/news?pid=20601103&sid=akZhwpE0wt_Q&refer=news

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You need to read this whole article. The issues here are complex and not easy to understand, but they will affect all of us in very significant ways for many years to come.

[roamer65]

1. Here's what I think Bernanke will do about the lending problem.

Begin hyperinflation of the money supply and buy just about any bonds or other paper the banks hold. In other words, pump them so full of cheap cash that they will have no choice but to lend. Obviously, inflation will go through the roof, but he doesn't seem to care about that side effect.

[Extend a Hand]

3. I think that article is describing a deflationary trend

where lenders are unwilling to lend. If the foreigners quit lending (by lending I mean buying government debt (bonds)) too it will be really really bad.

I think the only way the Fed (a private bank not a government entity) can create "new money" is to loan it into existence. If banks have already lost so much money that they can't meet the reserve requiremts on their outstanding loans then the Fed would have to lower reserve requirements to allow more bank lending. Since the credit crunch started I've read most banks are getting tighter with loans to improve their reserves to cover losses from bad debt.

Congress could increase the money supply if they wanted to by authorizing the issue of treasury notes. I've read that's how Lincoln financed the civil war without debt.

[proud progressive]

2. we are too fucking lazy to read the whole article!

just take me by the hand, tell me how much it could hurt and what i should do, then let me get back to being the typical, apathetic american that most of us really are:hurts:

[Tab]

5. Well, in short....

and yes, it's complex, but basically there's a huge reduction in the number of traders who want buy our financial product, or to put more simply, less people want to invest in America's financial product.

Price goes down.

Traders do okay because there's less of them to split the pie, but that'a about the extent of the upside.

What to do? I don't know. I'm 45 years old. I lived through the mid-70s meltdown, but something about this one really worries me. I'm considering getting a dual passport to somewhere.

I can't believe that one small group of 'men' can trash a country this powerful this quickly. Certainly a few things were out of their control but we can pin a lot - probably 70% of this crap - on their policies.

Dems have to win in November and actually take office. Another 8 years of GOP rule, and we won't have a country left to speak of.

Okay, I'll take you by the hand and lead you to the nearest embassy for the country you always wished you could go to. Don't apply for anything until after Jan 20th 2009, but if it is still the status quo by then, we either need an uprising or to skedaddle or something, because another 8 years of this and you can kiss this all goodbye.

Man, I never believed it took as little as 8 years to shove a 230+ year superpower down the toilet.

It's sad.

Personally, I'm considering Sealand: http://en.wikipedia.org/wiki/Principality_of_Sealand and http://www.sealandgov.org/

[enough]

4. Who is "we?"