Grasping at Straws

[Crewleader]

Full-Spectrum Breakdown

By MIKE WHITNEY

On Friday morning, Senator Christopher Dodd, the head of the Senate Banking Committee, was interviewed on ABC's “Good Morning America.” Dodd revealed that just hours earlier at an emergency meeting convened by Secretary of the Treasury Henry Paulson and Federal Reserve chairman Ben Bernanke, lawmakers were told that "We’re literally maybe days away from a complete meltdown of our financial system.” Dodd added somberly, that in his three decades of serving in public office, he had "never heard language like this.”

The system is at the breaking point, and despite Wall Street's elation from the proposed $1 trillion dollar bailout to remove toxic mortgage-backed debt from banks balance sheets, the market is still correcting in what has become a vicious downward cycle. This cycle will persist until the bad debts are accounted for and written off for or until the exhausted dollar-system collapses altogether. Either way, the volatility and violent dislocations will continue for the foreseeable future.

Most people don't understand what happened on Thursday, but the build-up of bad news on the Lehman default and the $85 billion government takeover of AIG, triggered a run on the money markets and a freeze in interbank lending. The overnight LIBOR rate (London Interbank Offered Rate) more than doubled to 6.44 per cent. Bank of America reported overnight borrowing rates in excess of 6 per cent. Longer-term LIBOR rates also rose sharply. On Wednesday, jittery investors removed their money from money markets and flooded short-term US Treasurys for the assurance of a government guarantee on their savings even though interest rates had turned negative which means that their balance would actually shrink at the date of maturity. This is unprecedented, but it does help to illustrate how raw fear can drive the market.

http://www.counterpunch.org/whitney09202008.html

[Tangerine LaBamba]

1. What no one is talking about

The fact is that AIG isn't in default on anything. They just want the government - the taxpayers, us - to buy their bad investments and leave them in a more solid position. That's all. They want to dump their mistakes on us just as a murderer would seek to drop a lead-weighted body into a deep, dark lake.

Paul Krugman puts it very succinctly: http://krugman.blogs.nytimes.com/2008/09/20/no-deal/

We're once again, as in the post-9/11 hysteria that got us the Patriot Act and that invasion of Iraq, caught up in a kind of hysteria that I'm thinking is beautifully manufactured so that the rich can get richer at the expense of the sinking middle class. Us.

[NMDemDist2]

2. good article, K&N n/t

[frogcycle]

3. did Secretary of the Treasury Henry Paulson and Federal Reserve chairman Ben Bernanke

mention anything about yellowcake? aluminum tubes?

just wondering...

[Adsos Letter]

4. A personal word of thanks Crewleader...

...you always find the time to bring us good articles/information. :hi:

[Crewleader]

5. Hi adsosletter

this article says it like it is....and it's good to hear from you friend! :hi:

[northernlights]

6. seems like a bunch of mushroom clouds to me

but not to worry, we'll sell these toxic investments at a big profit down the road. The buyout will pay for itself. With a big profit, even, for the murkin fodder uni...er, taxpayers. :sarcasm: