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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Cogito Ergo Sum who wrote (10399)	10/23/2008 4:46:17 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 33421

So why IS Lehman BK ? Damn good question... I suggest we ask the Ratings Agencies, the Naked shorts, and the FASB board (157, mark to market regulations for mortgage securities). When the RA's act to downgrade them because the shorts are manipulating their CDS's and underlying bonds, causing them to have to raise more capital, it kind of begs the question.. Not to say they weren't overleveraged, like so many other big banks (primarily European). And one a different note, many folks perceive the injection of all of this capital into the banking system as potentially inflationary. But I wonder if, given that the velocity of financial transactions seem to be decreasing markedly, that more liquidity is required to sustain the same level of economic activity. If I'm not mistaken, deleveraging represents destruction of the money supply as loans get paid back or defaulted on. All of that deleveraging is going to require some form of inflationary monetary policy just to keep pace with deflation (look at energy and other commodities). Seems to me the financial system will require much more capital in order to maintain previous economic levels. Am I wrong about this line of thought? Hawk