Use access key #2 to skip to page content.

alstry (36.16)

Crisis Alert !!!!!!

Recs

11

September 13, 2008 – Comments (9)

Timothy F. Geithner, the president of the New York Federal Reserve, called a 6 p.m. meeting so that bank officials could review their financial exposures to Lehman Brothers and work out contingency plans over the possibility that the government would need to orchestrate an orderly liquidation of the firm on Monday, according to people briefed on the meeting.

Flanked by Treasury Secretary Henry M. Paulson Jr. and Christopher Cox, the chairman of the Securities and Exchange Commission, he gathered the executives in person to impress on them the need to work together to resolve the current crisis.

Mr. Geithner told the participants that an industry solution was needed, no matter what, and that it was not about any individual bank, according to two people briefed on the meeting but who did not attend. They said he told them that if the industry failed to solve the problem their individual banks might be next.

http://www.nytimes.com/2008/09/13/business/13rescue.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1221308423-tz9TeHzF+LAhhJd27YVVIQ

Emergency Friday night meeting????   Wasn't the crisis supposed to be over.

Analyzing the crisis is not too hard. 

A banks assets are debt.  If debors can't pay banks, banks can't pay depositors.  If banks can't pay depositors...nobody can pay much of anything and we are all screwed.

For the past eight years, more and more banks have been loaning more and more money simply so debt could continue to be serviced.  Massive loans went out to municipalities, businesses and individuals.  As long as money as flowing out, many could pay just about anything for everything.  Now we have accumulated a huge pile of debt and banks are running out of money to loan to keep the game going.

The real problems will start to visibly surface when companies run out of borrowing capacity.  Many are on the brink today....businesses open one day will close the next stranding customers, employees, and vendors.  The chain reaction could be a mess.  The following is an example from Europe:

The government was facing a £20m bailout of the holiday industry's compensation scheme following the collapse of the XL travel group, which has left 85,000 holidaymakers stranded abroad.

As the first rescue flights started bringing holidaymakers back to Gatwick, it emerged that the failure of the UK's third-biggest travel operator will force the government to bail out the Civil Aviation Authority's compensation scheme, which is already £21m in deficit.

More than 285,000 holidaymakers were caught up in XL's collapse at 2.30am yesterday in what has been described as one of the biggest failures in the travel industry. Up to 1,700 staff face losing their jobs, including 200 pilots. Planes have been impounded stranding passengers at 50 destinations in the US, the Caribbean and Europe.

http://www.guardian.co.uk/business/2008/sep/13/theairlineindustry.travelleisure

And we are supposed to trust the leaders who keep telling us everything is fine.  Any analyst worth his weight in salt knows this crisis eclipses ANY in the past. Good luck to us all.

9 Comments – Post Your Own

#1) On September 13, 2008 at 10:36 AM, dinodelaurentis (75.27) wrote:

Alstry,

  don't be silly. i see it on the news every day. this is the Age of No Consequence. the Internet Age. debt is like blogging, nothing ever comes of it. even here at the Fool.com people are explaing what a great opportunity to buy we have. buy banks no less. we all going to be rich. what are the banks' lendors going to do?  foreclose??

Silly Rabbit, tricks are for kids.

i'd love to stay and chat but i have to fill out a new credit card application that came in the mail.

It's got an introductory low rate and i'm pre-approved!!

Report this comment
#2) On September 13, 2008 at 12:36 PM, BradAllenton (31.75) wrote:

The solution at some point could be for the government to re-invent our monitary system. Kinda like a do over. I'm sure by the time they do it people would support it because the money they have won't be worth anything. I agree we are screwed........

Report this comment
#3) On September 13, 2008 at 12:44 PM, alstry (36.16) wrote:

A question was posed in the previous blog:

Are we a nation a nation going broke??????

The answer is we are likely a nation already broke.  There is only about $6 trillion in the bank against over $40 trillion in debt.  Much of our GDP was based simply on borrowing money.  Remember how our GDP bumped last quarter simply based on the government borrowing more money and giving it out to spend.

For the last eight years or so we have been a nation shipping our productive capacity overseas while buying and selling things from each other with borrowed money.

The bankers loaned huge money to municipalities, businesses, and individuals us which allowed us to live lavishly.  We were able to buy goods from all over the world (helping the global economy grow) as productive capacity grew outside America. 

Many of our jobs are with companies or municipalities who are dependant on borrowing money to stay in business.  Companies and municpalities borrowed simply to make interest payments.  The largest examples are our auto companies.  As business slows many companies will be foreced to shut down because they can't service the debt.

As businesses shut down they will bankrupt other businesses who were either owed large sums of money or were dependent as a supplier.  The above airline example will likely directly layoff about 2000 people.......but thousands more will be affected who were dependant in XL's viability.   They say for every line worker released at a auto company, 5-10 additoinal jobs are affected.

So what do we do now.....our bankers can't lend and our companies need to borrow to stay in business.  Some say just print money.....the problem with that is in order to print.....you need to have the expectation that the money can be paid back.....now that the ponzi scheme has been exposed....it is clear that few have the resources to pay back and few have any money to lend anyway.

NOT A SINGLE CANDIDATE IS  DISCUSSING THIS ISSUE....The campaign has become a contest between the black guy and the babe as America is flushed down the toilet.

The sad part is much of the world hates us now......no single president has done a better job squandering 200 years of goodwill more than the current administration.  In the end as we fall the world may cheer.....including the Europeans who prior had unending thanks for our incredible sacrifices in WW2.

Now we have a candidate who is encouraging war.  The strange part is no matter who is our ally going into the conflict.....in the end when oil reaches unheard of pricing.......we may have no friends on our side and we will be the ones standing alone naked while the rest of the world starts to pick at our corpse.

So here we are....bankers meeting in a panic this weekend......many of our largest financial institutions are on the brink of failure.....banks that had been in business over 100 years surviving world wars, great depressions, and more.....but it has all come to an end.....how are they going to break the news to us??.....are they going to tell us that there is simply no money left or are they gong to conceal the fact for another day as our economy slowly shuts down???

Report this comment
#4) On September 13, 2008 at 1:35 PM, BradAllenton (31.75) wrote:

It all feels a lot like the fall of Rome. Wars based on lies, Money based on nothing, focus being placed on less important issues, politicians disconnected from the gorilla in the room. This isn't new news. The US has been slowly failing for many years. The downward spiral just speeds up more twoard the bottom. As the rings of the spiral get smaller the movement of the failure speeds up. The US will not survive as is, this whole bank and war thing will either destroy us or set the stage for our distruction in the future. I believe and always have that our threats come from with in. Popular belief now, but I was "nutty" to think it just a few years back. Can we say in the end that we don't deserve it? Some saw this all coming, some didn't care to see it coming, but either way nobody did anything about it.

Report this comment
#5) On September 13, 2008 at 1:54 PM, dinodelaurentis (75.27) wrote:

and no one will address this in the election Alstry.

look at Ron Paul. "he's a kook." all Henny-penny and kicked out by the big business party, the fiscal conservitives. the party of the bankers.

and the democrats? "it's the economy, stupid" is as far as they go. they could nail the need for change down with the looming crises, but won't because they will adapt the same policies in office. hell, the party faithful are up to their necks in this stuff.

Vote For Me And All Your Dreams Will Come True.

 the last 30 years we've lived in the Age of No Consequence. taking the rap for your choices is for suckers. and we learn by the example of our national leaders. do not look for solutions there, it's a very bare cupboard.  i've been out of step with the masses the whole time. the nature of our democracy is to react, not act. every time i've heard "change", it turned out to be for the worse. politicians do not suceed by telling the truth. karl rove has tuned fear-mongering to a fine level. when things do get bad, the fear will be worse. think Weimar Republic. they won't conceal anything, just find someone else to blame. and a whole lot of folks will do just that because taking ownership of their problems means being mature. i know that i'm preaching to the choir here and that you know all of this.

"chance favors the prepared mind."  but i've also learned not to be satisfied by being right. people hate an "i told you so". in fact, people seem to resent those who can see it coming. you should Google "the cassandra syndrome". not economics but applicable in these blogs.

welcome to the club, kiddo.

the Question seems to be " Knowing this, now what?" not Where Are We but Where Do We Go From Here? so far, i can only speak for myself and my family. i entered the market at my age to gather a few more shekels with which to gather assets that will help my loved ones maintain body and soul in the coming Hard Times. i only invest what i can afford to lose.

i wonder what we'll call it? The Great Depression 2?

Report this comment
#6) On September 13, 2008 at 2:30 PM, cbwang888 (25.57) wrote:

 

All these bailouts from FED is not helping anything (only slowdown the death of some overleaveraged financial firms)  but hurting health of the US economy. It drags other non-financial sectors down.

Watch USD to dive from here.

FED will continue to print and foreign countries like China will dump USD in a hurry ....

That will make US deficits look smaller compare to commodity price ...

Yeah the house price may not plummet as fast, but with the equity people have in their house, they can afford to buy less ...

Weak USD and rising commodities will force lots of older US people to forget about their retirement. Keep on working till the day you are gone...

Our kids are not doing any better. Education funds cut and teachers are out of jobs. More national debts for them in the future...

At the same time, US is buying 70% of foreign crude oil that send 700B to OPEC per year ...

Another 8 years of this, you can imagine will happen ...

Report this comment
#7) On September 13, 2008 at 2:31 PM, cbwang888 (25.57) wrote:

 

All these bailouts from FED is not helping anything (only slowdown the death of some overleaveraged financial firms)  but hurting health of the US economy. It drags other non-financial sectors down.

Watch USD to dive from here.

FED will continue to print and foreign countries like China will dump USD in a hurry ....

That will make US deficits look smaller compare to commodity price ...

Yeah the house price may not plummet as fast, but with the equity people have in their house, they can afford to buy less ...

Weak USD and rising commodities will force lots of older US people to forget about their retirement. Keep on working till the day you are gone...

Our kids are not doing any better. Education funds cut and teachers are out of jobs. More national debts for them in the future...

At the same time, US is buying 70% of foreign crude oil that send 700B to OPEC per year ...

Another 8 years of this, you can imagine will happen ...

Report this comment
#8) On September 13, 2008 at 4:17 PM, alstry (36.16) wrote:

We Ain't Seen Nothing Yet.............airlines have been shutting down left and right....tens of thousands of passengers stranded....airfares going through the roof....travel slowing as airlines cut flights and lay off thousands........now this from the CEO of British Airways

Up to 30 more airlines will go bankrupt before Christmas, the chief executive of British Airways warned yesterday, as the biggest rescue of stranded passengers in travel industry history began.

Willie Walsh said the scenes of chaos in which 85,000 passengers have been stranded at locations around the world after the collapse of XL, Britain's third largest holiday company, would become a familiar sight as the travel industry struggled with soaring fuel costs and the effects of a global economic downturn.

"We are in the worst trading environment the industry has ever seen", said Mr Walsh. "We have already seen 30 or so airlines go bust this year and it would be fair to expect a similar number of casualties worldwide over the next three to four months."

Mr Walsh also announced up to 1,400 redundancies at his own airline yesterday.

Report this comment
#9) On September 13, 2008 at 5:43 PM, BradAllenton (31.75) wrote:

In some of these dooms day scenarios investing and money become a moot point. Ideas like buy the short USD etf or invest in other countries won't do jack in some of the worst case scenarios. (if we do end up coming out ok they are not bad ideas) Think about this, if our system implodes, the whole system will fail. Your broker, your bank, your money, ALL of it. In a worse case it will come down to the most basic needs. Food, water, shelter, and protection. You have to be able to fend for yourself and not expect much help from a government, from paper money, or electronic zeros in an account. Every part of the stock market is a sham and if the bottom falls out we will all see that it was all an illusion. Institutions have used the stock market to hose the little guy for years. Ask yourself this: Why do they care if we invest? Why is it important for them for us to buy stock? Who is selling us the stocks? Who really makes out in the end?

Report this comment

Featured Broker Partners


Advertisement