Saturday, August 11, 2007

The Fed's Meltdown

The names may change to protect the innocent...

Oops, there aren't any here.
10 years ago began the greatest financial crisis of our modern economic age. The collapse of the Asian Tigers in the summer of 1997 eventually led to the collapse of the Russian bond market in 1998. This led to the near collapse of the global economic system.
This time the difference is the US is King Kong. Russia was a baby chimp.

The entire planet is papered in US debt .

Think about it.
Even Greenspan agrees with me on that one. Now we find ourselves at a similar decisive point. We are at the wrong place at the wrong time. I believe we will date economics from Before Chrysler and After Chrysler in the summer of 2007. The reason for that is we have seen the credit spigot dry up. When risk is factored into the pricing it is all over. All of it!

We are looking at liabilities in the 600 TRILLION range, not billion. We are looking at unwinding 600 TRILLION in unfunded liabilities at all levels of the global economy. Braying Bernie and his Fed can't print enough money to cover it. The entire economic system can't comprehend it, much less deal with it. Once you look at the harsh realities underlying the global and domestic economies you realize we are like the people sitting in their cars on that bridge in Minneapolis. Take care of yourself since you can't expect any help from the system.
As I've said many times, learn to be
kind to the ass that bears you

Neo's gonna push the reset button.

Don't miss this one.


The Fed today injected $65 bln of repos, extending credit to banks to shore up their liquidity needs. Normally the Fed only accepts treasuries as collateral. But the banks no longer have enough treasuries, or they don't want to sell their "safe" assets in exchange for credit. But they do have lots of risky assets like CDOs that everyone wants to get rid of. The Fed bent over and today announced they will take those "off their hands".
Found here.