Hi Zeus, these European and Asian banks are sitting on thousands of credit default swaps that were built into CDO's; and the Credit Default Swaps are not going to get paid. There has already been widespread talk that this US bailout will extend to foreign banks that have conducted a lot of business in the US.
That's how this solid wall of storm surge is going to cost several trillion dollars and as Warren Buffet has mentioned repeatedly, these CDO's and then the Credit Default Swaps and other swaps and derivatives are set up in a Daisy chain manner in which the swath of the storm and the fiancial damage just continues to increase exponetially.
As Bob Furman has pointed out, we'll need to see a very quick Supra National Agency with heavy participation by the FED, The UK Financial Services Authority; the ECB, The Swiss National Bank, The Bank of Japan..... our buddies in Beijing, the RBA (Aust); Canada etc come to create the workout schedule of this.
I have also mentioned the need for this on a half dozen occasions on this thread. This is a failure of the Global financial system and as we have witnessed with AIG and their CDS group of 377 people located in London; coupled with Citi having these billions of dollars of SIV write offs.... again created by unit in the City financial district in London......
London and it's government is every bit as culpable and should have to come up with a bailout on a dollar for dollar ... pound for pound basis. UBS in Switzerland is culpable in this travesty; as are German, Dutch, French; Asian banks in Honk Kong; even Abu Dhabi. The hammer needs to fall hard all of the players. That's why the US Dollar has been so strong since mid July. All of these foreign banking and investment entities need to pay as well.
There should be hell to pay if they don't and McCain and Obama should read up on the cliff notes on this and tell Global system the way it will be.
The fact, that so many will balk at this and in many other cases just not have the reserves to make the situation right; is the underlying bullish arguement as to why we can see dramtically higher stores of asset value.... Gold, Silver, Crude, Grains, Copper..... et ala. these stores of value can go up dramatically while US real estate goes down or coalesces into a bottoming pattern.
Regional US real estate is not fungible; is not transportable and as Art Cashin has famously said..... you want to keep enough gold to be able to bribe the boarder guards
... well it's tough to be able to tuck part of a colonial, a split-level; or a duplex into your overcoat to achieve your fungible liquidity needs when you need to be able to bribe the boarder guards or convert it into something as readily valuable.
John
edit..... NOW if you have a SKY HOOK... and can readily relocate said real estate assets...... but alas, the SKY HOOK is a story for another day. |
