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Old 20-09-2008, 02:28 PM
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amadan amadan is offline
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Default Hey Pupshock!

What's your take on this current situation? You insights much appreciate.
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Old 20-09-2008, 11:10 PM
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Originally Posted by amadan View Post
What's your take on this current situation? You insights much appreciate.
'Tis the big Minsky moment of a financial crisis.
http://en.wikipedia.org/wiki/Minsky_moment
http://en.wikipedia.org/wiki/Hyman_Minsky
http://en.wikipedia.org/wiki/Financial_crisis

West: money no enough. Ended up with the debt.
East & oil producers: money mucho. Ended up with the credit. Everything they touch explodes in price.

Now, Governments resolve financial crises. See what Hank & Ben are up to.
Always.
Because
1. they can assume bad debts (bail out creditors). This option is possible if
a. they have enough money, or
b. they can borrow enough money, or
c. they are profitable enough.
2. they can create money. This option means inflation and currency depreciation.

My 2c worth (worth very little nowadays). Glad to hear what others have to say.

.
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Old 22-09-2008, 10:59 AM
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Quote:

1. they can assume bad debts (bail out creditors).
a. they have enough money, or
b. they can borrow enough money, or
c. they are profitable enough.
2. they can create money. This option means inflation and currency depreciation.
1) Like Khazanah absorbing our NPL's 1998?
2) Like pegging our ringgit?

A few more...

- banning of short selling in the stock market
- Capital controls to stop money leaving the system (coming soon, I think)
- Suspension of the rule of law in dealing with the crisis

I tell you, they have Mahathir over there as their advisor!
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Old 22-09-2008, 12:01 PM
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pupshock pupshock is offline
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nah, all dats too complicated. wazzat rule of law jazz? Just give Hank a call
http://www.washingtonpost.com/wp-dyn...091702976.html

By Alan Neff
Thursday, September 18, 2008; Page A21

"Hello! You've reached the United States Treasury's automated bailout hotline. Please listen carefully, because our options have recently changed. If you're too big to fail, press or say 'one.' If not, hang up and dial 1-800-FOR-FEMA.' "

"One."

"Great! You've selected Option One. If you're a bank, press or say 'one.' If you're a brokerage firm, press or say 'two.' If you're an insurance company, press or say 'three.' "

"Three."

"You've selected Option Three, which means you're an insurance firm. Did I get that right?"

"Yes."

"Okay, let's drill down a little further. If you're calling because you're besieged by class-action lawsuits brought by take-no-prisoners plaintiffs' attorneys because your large corporate policyholders committed innumerable mass toxic torts, press or say 'one.' If you're calling because you insured billions of dollars' worth of undocumented, nonperforming mortgages, press or say 'two.' "

"Two. No, wait, one. I mean, uh, both."

"I'm sorry. I didn't understand. Let's try something else. If you're the CEO of an insurance company with a servile compensation committee that gave you an irrevocable golden parachute, press or say 'one.' If you've served on corporate boards with Henry Paulson, press or say 'two.' If you believe in strict market Darwinism for every company but yours, press or say 'three.' "

"Three."

"If you want your check automatically deposited into your company's bank account, press or say 'one.' If you want cash in small, unmarked, used, nonsequential bills delivered to a branch office in Zurich or the Cayman Islands, press or say 'two.' "

[Silence. Thinking. Surge of fiduciary energy.] "One."

"Okay. Please enter the amount you want using the number keys. Use the star sign for a decimal point and press pound when you've finished."

[Lengthy series of numbers entered, followed by the pound sign.]

"Wow! You are in trouble! Your funds should clear in three business days. When you have another claim, call back. Thank you for calling, and have a great day!"
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Old 24-09-2008, 01:23 PM
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pupshock pupshock is offline
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Quote:
Originally Posted by amadan View Post
1) Like Khazanah absorbing our NPL's 1998?
2) Like pegging our ringgit?
A few more...
- banning of short selling in the stock market
- Capital controls to stop money leaving the system (coming soon, I think)
- Suspension of the rule of law in dealing with the crisis
But assuming we'll go with the rule of law & Hank's phoneline gets cut off

1. Correct. The banks need money in &/or bad debts out. Govt money comes in, either by
overpaying for the NPL/bad loans, or by making an equity 'investment' into or nationalization of the banks.
This is because the avenue for raising money from private money (eg private equity, Warren Buffett, SWF, etc) is more or less closed.
The Govt will do this by
1a. get enough money - sell Govt assets. Seize private assets eg AIG. Loot.
1b. borrow money - Sell Treasuries.
1c. get profitable - Tax. tax the rich. tax those who did good during the boom times.
2. Print. Devalue, not peg.

Banning short selling is a play for time. Now that Lehman is bankrupt, their assets will be liquidated, and it will be very interesting to see what kind of prices those assets will sell for.

Capital controls not likely because #1b requires the kindness & forbearance of foreigners, as does #2.

.
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Old 10-10-2008, 10:30 PM
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pupshock pupshock is offline
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1. Correct. The banks need money in &/or bad debts out. Govt money comes in, either by
overpaying for the NPL/bad loans, or by making an equity 'investment' into or nationalization of the banks.
The only way now to prevent 'this sucker from going down'

http://www.ft.com/cms/s/0/3c29a40a-9...nclick_check=1
Temporary full state ownership is only solution
By Paul De Grauwe

The essence of what banks do in normal times is to borrow short and lend long. In doing so, they transform short-term assets into long ones, thereby creating credit and liquidity....
This credit transformation model performed by banks only works if there is confidence in the banks and, more importantly, if banks trust each other. This confidence has now evaporated and, as a result, the model fails....
The result is a massive destruction of credit and liquidity in the economy. The non-banking sector cannot borrow long so as to acquire liquid assets that they need to run their business, because banks do not lend long anymore. ...
It is important to realise that this liquidity crisis is the result of a co-ordination failure: bank A does not want to lend to bank B, not necessarily because it fears insolvency of bank B but because it fears other banks will not lend to bank B, thereby creating insolvency of bank B out of the blue. Thus bank lending comes to a standstill because banks expect bank lending to come to a standstill.

How to get out of this bad equilibrium? There is only one way. The governments of the big countries (US, UK, the eurozone, possibly Japan) must take over their banking systems (or at least the significant banks). Governments are the only institutions that can solve the co-ordination failure ...
once the banks are in the hands of the state, they can be ordered to trust each other and to lend to each other. The faster governments take these steps, the better.

Government interventions have consisted of recapitalising banks. These have not worked. The main reason is that they have been triggered by bank failures as they pop up and, as a result, have only dealt with the symptoms. The liquidity crisis is pulling down asset prices in an indiscriminate way, thereby transforming the liquidity crisis into solvency problems of individual banks. The governments, then, are forced to step in and to recapitalise the bank only to find out later that when the liquidity crisis strikes again, the capital has evaporated.
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