The coming US dollar crisis Message Board

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Strategies & Market Trends : The coming US dollar crisis

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To: IngotWeTrust who wrote (12305)	10/3/2008 5:25:08 PM
From: Real Man	4 Recommendations Read Replies (1) of 71456

Stuff hitting the fan now. rgemonitor.com Yesterday Thursday a senior market practitioner in a major financial institution wrote to me the following: Situation Report: So far as I can tell by working the telephones this morning: * LIBOR bid only, no offer. * Commercial paper market shut down, little trading and no issuance. * Corporations have no access to long or short term credit markets -- hence they face massive rollover problems. * Brokers are increasingly not dealing with each other. * Even the inter-bank market is ceasing up. This cannot continue for more than a few days. This is the economic equivalent to cardiac arrest. Then we debated what is necessary to restart the system. I believe that the government will do another Hail Mary pass, with massive guarantees to the short-term commercial credit system and wide open short-term lending by the Fed (2 or 3 times expansion of the Fed balance sheet). If done on a sufficient scale this action will probably work for a while. But none of these financial measures affects the accelerating recession -- which will in turn place more pressure on the financial sector. Another senior professional in a major global financial institution wrote to me: Today, in our trading room, I could see the manifestations of a lending freeze, and the funding hiatus for banks and companies, with libor bid only, the commercial paper market closed in effect, and a scramble for cash - really really scary. Do you think this is treatable without a) a massive coordinated liquidity boost and easing of monetary policy and b) widespread nationalisation of some banks, gtess to others AND a good bank/bad bank policy where some get wiped along with their investors? The Treasury Tarp plan is an irrelevance if we are at a major funding crisis.

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