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204 comments on DrumBeat: March 9, 2008

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euro on March 9, 2008 - 1:55pm Permalink | Subthread | Parent | Comments top

A brilliant summary. But not a realistic one. YOU know what is happening, ugly things, indeed. But you forget, that your central bank, your government and the whole elite in the US ALSO KNOW THIS! Do you really think, that those people/institutions act like sheep? Doing nothing?

- they will sacrifice the $
- they will dump interest rates towards 0%
- they will just forbid the banks to call in loans
- they will pump in massive amounts of money into the system
- there will be coordinated action of all important central banks in the world towards lowering interest rates, regardless of inflation. Add to this international coordinated huge money inflows.

Those steps are already underway, did you notice that? And you know what? These steps are allright.

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creg on March 9, 2008 - 2:08pm Permalink | Subthread | Parent | Comments top

i noticed the ECB did NOT lower rates last week & at least for now to see central banks not together is greyzone/largi's scenario probably here.

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River on March 9, 2008 - 4:11pm Permalink | Subthread | Parent | Comments top

As interest rates near zero other factors come into play...Beyond this point lay dragons...

'In monetary economics, a liquidity trap occurs when the economy is stagnant, the nominal interest rate is close or equal to zero, and the monetary authority is unable to stimulate the economy with traditional monetary policy tools. In this kind of situation, people do not expect high returns on physical or financial investments, so they keep assets in short-term cash bank accounts or hoards rather than making long-term investments. This makes the recession even more severe, and can contribute to deflation.'

'The monetary authority can increase the overall quantity of money available to the economy, but traditional monetary policy tools do not inject new money directly into the economy. Rather, the new liquidity created must be injected into the real economy by way of financial intermediaries such as banks. In a liquidity trap environment, banks are unwilling to lend, so the central bank's newly-created liquidity is trapped behind unwilling lenders.'

http://en.wikipedia.org/wiki/Liquidity_trap

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BrianT on March 9, 2008 - 4:25pm Permalink | Subthread | Parent | Comments top

The rumour is that a giant taxpayer funded bailout (the first of many) is being worked on right now. The key is to make it look like it is helping the sheeple while actually taking their money (through increased government spending) and transferring it directly to the undercapitalized banking sector. The fly in the ointment is that the USA banking sector appears to have zero interest in prudent business operations, so the taxpayer money will likely be pissed away as fast as possible. IMHO, the main problem which is not being addressed is that the shareholders of North American financial institutions have little or no power to control the reckless and self serving actions of upper management and the board. This isn't capitalism at all-the owners of these companies are just chickens to be plucked-call it an "insider business model".

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GreyZone on March 9, 2008 - 11:39pm Permalink | Subthread | Parent | Comments top

They will forbid banks to call in loans? When that same government is the one that requires them to have some tiny amount of capital and the only way to raise that capital now is to make margin calls?

You live in an odd world, sir. Let's hope the real world is as odd as yours.

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