TGC’ers - News Bulettin 13-10-08
ON THE VERY BRINK OF COMPLETE GLOBAL FINANCIAL COLLAPSE!
WHAT WE ARE ABOUT TO EXPERIENCE HAS NO PRECEDENT.
THE WORLD’S BANKING SYSTEM IS BEING NATIONALISED AS
WE DO NOT KNOW WHAT THE COMING WEEKS WILL BRING…
No G7 official
was sure the plan would work, so deep is the financial crisis.
If it does not, the next steps would be one of two nuclear
options: to guarantee all liabilities of banks, in effect
nationalising the financial system, or for governments to
seek to bypass financial institutions by lending directly
to companies and households.
the New Statesman:
We are witnessing
the collapse of the world financial system. To have said
that even a month ago would have been to invite ridicule,
but now it seems only a statement of the obvious as banks
implode, governments panic and investors run. The initial
liquidity crisis that broke in August 2007 and drove Northern
Rock to the wall has evolved into a crisis of insolvency
and finally into a crisis of confidence in the entire financial
The global financial
system is on the brink of a meltdown and additional steps
must be taken immediately by the richest nations to calm
jittery bankers and investors, the International Monetary
Fund warned Saturday.
solvency concerns about a number of the largest U.S.-based
and European financial institutions have pushed the global
financial system to the brink of systemic meltdown,"
said Dominique Strauss-Kahn, IMF managing director.
heading for bankruptcy! - 13-10-08
At the moment the US dollar has rallied
because the companies in the US are liquidating their overseas
assets to shore up there domestic obligations (ie, they
sell AUD assets and others and convert to USD).
trouble is they are still running out of US dollars because
the value of the US dollar assets (ie. home loans, businesses)
have fallen below the value of the debts. This means that
the US citizens and companies are essentially bankrupt with
0 USD in equity. So the US government has to decide
out of bankruptcy (print money to reduce the value of debt
and increase the value of assets through inflation)
more money and curb spending on all government expenditure.
Japan, Korea and other account surplus countries will not
be happy with Option 1 as they are holders of a lot of US
government debt. However, the US government will likely
choose option 1.
result will be high interest rates for US debt and low asset
values which will be scooped up by foreign countries with
real equity left on their balance sheets. Sad story for
the US but that's what happens when you consume more than
you produce and fund the difference with increasing debt