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2008-10-01 Home Front Economy
Crisis of confidence shakes banks ahead of Congressional vote today
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Posted by lotp 2008-10-01 06:59|| || Front Page|| [2 views ]  Top

#1  a self-fulfilling run on the system

The 'system' is damaged but could function adequately - if the participants all had enough confidence to let it. That's what the bail-out is intended to do: the only reason to believe it could work is that it does not have to affect reality, just perception.
Posted by Glenmore 2008-10-01 08:25||   2008-10-01 08:25|| Front Page Top

#2 increased injections of funding were met with rapid increases in the amount of money banks were opting to put on deposit at the central bank.

And this is the key reason the bailout will not work. I hate to go all Keynesian on you, but we are falling into a liquidity trap. Congress should instead be appropriating funds for major capital improvements, highways, nuclear power stations, etc., not rescuing the hos who got us into this mess. The capital gains and corporate income taxes should be repealed. We will need spending, not liquidity.
Posted by Nimble Spemble 2008-10-01 08:40||   2008-10-01 08:40|| Front Page Top

#3 There is a lot of anger about the bailout bill. I for one get tired of hearing that giant sucking sound that sucks taxpayer money into the Washington blackhole. Get rid of the lobbyists, graft, corruption, influence buying and pedaling, back-door deals, partisan politics, and insidious under-the table vote trolling. Do something about manufacturing, jobs, OUTSOURCING OF JOBS, energy, give-away programs and WE MIGHT MORE WILLING TO LISTEN TO YOU WHEN YOU ASK FOR MORE, AND MORE MONEY.
Posted by JohnQC 2008-10-01 08:57||   2008-10-01 08:57|| Front Page Top

#4 "Sow the wind, reap the whirlwind."--King Solomon

Everybody has goofed here: politicians, bankers, and the rest of us. The politicians are playing power games instead of leading. The bankers see money, not wisdom in using it. And for three generations the rest of us have had the attitude, "I want it now."

We have to address this mess on all levels.
Posted by mom ">mom  2008-10-01 09:22|| http://idontknowbut.blogspot.com]">[http://idontknowbut.blogspot.com]  2008-10-01 09:22|| Front Page Top

#5 .. almost no bank was willing to lend to any other.

Which invites (direct or indirect) nationalization. Stupid rabbit.
Posted by Procopius2k 2008-10-01 09:29||   2008-10-01 09:29|| Front Page Top

#6 overnight interbank lending rates spiked to painfully high levels in the major currencies, with overnight dollar Libor leaping 4.3 percentage points to a seven-year high of 6.88 per cent.

Kind of like an adjustable rate mortgage ratcheting up, eh?
Posted by bigjim-ky 2008-10-01 10:11||   2008-10-01 10:11|| Front Page Top

#7 Much more than that.   Overnight lending between banks is quite literally what makes access to credit of all kinds possible for most consumers and businesses.   When it dries up, expect an accelerating economic downturn to follow.
Posted by lotp 2008-10-01 11:34||   2008-10-01 11:34|| Front Page Top

#8 Out of curiosity, what do all the banks decide to do with the money they aren't using to lend to each other anymore?
Posted by Grenter, Protector of the Geats 2008-10-01 11:57||   2008-10-01 11:57|| Front Page Top

#9 They hold onto it in less productive and risk averse ways.  They don't lend it out much, and certainly  not to the people who are most likely to use it in economically productive ways.    At best they deposit it with their national bank or the European Central Bank.

That means a substantial reduction in the 'velocity' of the money supply, i.e. how often a dollar or euro is traded for goods or services in a given year. Low velocity = low economic activity/productivity = recession or depression.

The effect starts slowly but then snowballs. That's why you can't look at the stock market today and decide things are just hunky dory out there.

Credit card and mortgage rates will go up - and go up much higher than they would otherwise have done. Businesses will find it hard to finance supply purchases and new hires - or worse, find themselves unable to collect what's owed them by other businesses on time (or at all) and unable to get a bridge loan. That means layoffs and bankruptcies. Consumers will spend less and as a result stores etc. will lay off workers. etc etc

This is the cascade of accelerating failures that we will either slow down now or lose control of quickly.
Posted by lotp 2008-10-01 12:15||   2008-10-01 12:15|| Front Page Top

#10 The Freddy Krueger bailout bill moves through the Senate gaining more pork and earmarks.

$875 Billion and growing.

Really a bill onto itself, the mental health parity measure has been a bipartisan priority for top lawmakers in both chambers but has stalled because of disagreements again over how to pay for its estimated $3.8 billion five-year cost. In the current climate, that seems to be no longer a stumbling block, and if the Treasury plan becomes law, it will also.

The rural school aid is smaller —about $3.3 billion over the next five years— but has great importance for many Western communities and could be important then in the House.

Congressional Budget Office estimates indicate that the net impact will be to add almost $105 billion to an already large deficit next year, and fiscal conservatives will feel they are being straight-armed by the Senate which has refused to do more to offset the costs. Yahoo News at:


http://news.yahoo.com/s/politico/20081001/pl_politico/14161

Posted by JohnQC 2008-10-01 12:58||   2008-10-01 12:58|| Front Page Top

#11 I THINK Bush has the balls to veto it if it's too pork laden.
(I sincerely hope so)
Posted by Redneck Jim">Redneck Jim  2008-10-01 16:52||   2008-10-01 16:52|| Front Page Top

#12 RJ- I sincerely doubt it; the way he has been groveling this past week, it would not surprise me to see him at the table in the House or Senate ( whichever one finally approves the latest version last) and actually snatch it away and sign it before the previous signature is dry.
Posted by USN, Ret. 2008-10-01 17:38||   2008-10-01 17:38|| Front Page Top

#13 See also REDDIT > BBC: US SUPERPOWER STATUS IS SHAKEN.
Posted by JosephMendiola 2008-10-01 22:18||   2008-10-01 22:18|| Front Page Top

11:28 Ulush Gonque1304
23:50 USN,Ret.
23:47 Jolutch Mussolini7800
23:35 Steven
22:57 JosephMendiola
22:57 Barbara Skolaut
22:52 Barbara Skolaut
22:48 JosephMendiola
22:42 Chuck Sinatra8071
22:38 JosephMendiola
22:33 Zhang Fei
22:18 JosephMendiola
22:16 JosephMendiola
22:13 JosephMendiola
22:11 rjschwarz
22:08 Uleth Guelph1169
22:06 rjschwarz
22:04 rjschwarz
22:04 Procopius2k
21:54 ed
21:52 Jolutch Mussolini7800
21:49 Procopius2k
21:42 tipover
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