The G-7 -- Geopolitics, Politics and the Financial Crisis published by www.stratfor.com
(http://www.stratfor.com)
The finance ministers of the G-7 countries are meeting in Washington. The first announcements on the meetings will come this weekend. It is not too extreme to say that the outcome of these meetings could redefine how the financial markets work, certainly for months and perhaps for a generation. The Americans are arguing that the regime of intervention and bailouts be allowed to continue. Others, like the British, are arguing for what in effect would be the nationalization of financial markets on a global scale. It is not clear what will be decided, but it is clear that this meeting matters.
The meetings will extend through the weekend to include members of the G-20 countries, which together account for about 90 percent of the global economy. This meeting was called because previous steps have not freed up lending between financial institutions, and the financial problem has increasingly become an economic one, affecting production and consumption in the global economy. The political leadership of these countries is under extreme pressure from the public to do something to solve — or at least alleviate — the problem.
Underlying this political pressure is a sense that the financial class, people who run global financial institutions, have failed to behave responsibly and effectively, and have therefore lost their legitimacy. The expectation, reasonable or not, is that the political system will now supplant these managers and impose at least a temporary solution. The finance ministers therefore have a political mandate, almost global in scope, to act decisively. The question is what they will do?
That question then divides further into two parts. The first is whether they will try to craft a single, global, integrated solution. The second is the degree to which they will take control of the financial system — and inter-financial institution lending in particular. (A primary reason for the credit crunch is that banks are currently afraid to lend — even to each other.) Thus far, attempts at solutions on the whole have been national rather than international. In addition, they have been built around incentivizing certain action and increasing the available money in the system.
So far, this hasn't worked. The first problem is that financial institutions have not increased interbank lending significantly because they are concerned about the unknowns in the borrower's balance sheet, and about the borrowers' ability to repay the loans. With even large institutions failing, the fear is that other institutions will fail, but since the identity of the ones that will fail is unknown, lending on any terms — with or without government money — is imprudent. There is more lending to non-financial corporations than to financial ones because fewer unknowns are involved. Therefore, in the United States, infusions and promises of infusion of funds have not solved the basic problem: the uncertain solvency of the borrower.
The second problem is the international character of the crisis. An example from the Icelandic meltdown is relevant. The government of Iceland promised to repay Icelandic depositors in the island country's failed banks. They did not extend the guarantee to non-Icelandic depositors. Partly they simply didn't have the cash, but partly the view has been that taking care of one's own takes priority. Countries do not want to bail out foreigners, and different governments do not want to assume the liabilities of other nations. The nature of political solutions is always that politicians respond to their own constituencies, not to people who can't vote for them.
See next post...
This weekend some basic decisions have to be made. The first is whether to give the bailouts time to work, to increase the packages or to accept that they have failed and move to the next step. The next step is for governments and central banks to take over decision making from financial institutions, and cause them to lend. This can be done in one of two ways. The first is to guarantee the loans made between financial institutions so that solvency is not an issue and risk is eliminated. The second is to directly take over the lending process, with the state dictating how much is lent to whom. In a real sense, the distinction between the two is not as significant as it appears. The market is abolished and wealth is distributed through mechanisms created by the state, with risk eliminated from the system, or more precisely, transferred from the lender to the taxing authority of the state.
The more complex issue is how to manage this on an international scale. For example, American banks lend to European banks. If the United States comes up with a plan which guarantees loans to U.S. banks but not European banks, and Europeans lend to Europe and not the United States, the integration of the global economy will very quickly shatter, leading to significant limitations on international trade, currency convertibility and so on. You will nationalize economies that can't stand being purely national.
At the same time, there is no global mechanism for managing radical solutions. In taking over lending or guarantees, the administrative structure is everything. Managing the interbank-lending of the global economy is something for which there is no institution. And even with coordination, finance ministries and central banks would find it difficult to bear the burden — not to mention managing the system's Herculean size and labyrinthine complexity. But if the G-7 in effect nationalize global financial systems and do it without international understandings and coordination, the consequences will be immediate and serious.
The G-7 is looking hard for a solution that will not require this level of intrusion, both because they don't want to abolish markets even temporarily, and more important, because they have no idea how to manage this on a global scale. They very much want to have the problem solved with liquidity injections and bailouts. Their inclination is to give the current regime some more time. The problem is that the global equity markets are destroying value at extremely high rates and declines are approaching historic levels.
In other words, a crisis in the financial system is becoming an economic problem — and that means public pressure will surge, not decline. Therefore, it is plausible that they might choose to ask for what FDR did in 1933, a bank holiday, which in this case would be the suspension of trading on equity markets globally for several days while administrative solutions are reached. We have no information whatsoever that they are thinking of this, but in starting to grapple with a problem of this magnitude — and searching for solutions on this scale — it is totally understandable that they might like to buy some time.
It is not clear what they will decide. Fundamental issues to watch for are whether they move from manipulating markets through government intrusions that leave the markets fundamentally free, or do they abandon free markets at least temporarily.
Another such issue is whether they can find a way to do this globally or whether it will be done nationally. If they do go international and suspend markets, the question is how they will unwind this situation. It will be easier to start this than to end it and state-controlled markets are usually not very attractive in the long run. But then again, neither is where we are now.
From stratfor.com (http://www.stratfor.com/analysis/20081010_red_alert_g_7_geopolitics_politics_and_financial_crisis_open_access)
http://www.guardian.co.uk/business/2008/oct/11/banking-globaleconomy
They have a plan. It's missing the part about arresting Bernanke, Paulson, Cox, Dodd, et all that I was hoping to see. d*
The five-point plan
· Pledge to save key banks from collapse
· Action to free-up credit and money markets by providing ample amounts of liquidity from central banks
· Support for the part-nationalisation of banks and other institutions by the taxpayer purchase of shares
· Stronger deposit protection schemes to reassure savers their money is safe
· Force banks to disclose the true state of their losses
It sounds like the Socialists win no matter how you slice it. The Russians have already shut their market down a time or two recently. Will the rest of the world have to do the same. Chavez in Venezuela is socialising many things. Even the concrete industry. Cemex is trying to fight back. I don't know if they can be successful. It gets pretty hard to be optimistic about anything. The world as we have come to know it seems to be winding down and at a pretty high rate of speed. We the people seem pretty powerless in the face of all this. We just try to do it one day at a time and we never know what the next day will bring. No wonder it is called a Depression.
So nobody thinks this is part of a plan to work out Daddy Bush's New World Order? In his speech he nearly guaranteed they would be successful....seemed very sure of it.
I don't know...just wondering.
I think Papa Bush is just a spokes-model for the NWO. But I agree this part of the globalists plans to create a one world financial order. Most likely to be followed by one world government in the near future. I'll be suprised if the elections even take place.
I have been thinking martial law and dictatorship is a major option for a long time, but I'm not positive enough about it to predict it. Just a very likely possibility given the preparations shrub has been making over the years.
I mean.. why should he want to stay when he should be running for safety maybe to the South American ranch he recently purchased?
If anyone is curious, here's a member list of the Trilateralists... http://www.augustreview.com/knowledge_base/getting_started_with_globalism/trilateral_commission_membership_-_2008_20081010103/
Yesterday they were talking about closing the world markets... http://www.bloomberg.com/apps/news?pid=20601087&sid=aP5mpMUORBWM Wonder if that will entail a bank closure, also? ???
Patrick Wood of the August Review seems to think that the bailout will lead to the ruin of the USA as we know it....
MONEYNETDAILY
China stiffing America for $100 billion in debt
Yet U.S. taxpayers helping Beijing as part of trillion-$ credit bailout
http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=77687
Saturday, October 11, 2008
Tape Blows Cover On True Treasury Intentions
The new kid at the Treasury hasn't quite learned you really can't talk in public about what you are really up to at Treasury. New Interim Secretary of the Office of Stability, Neel Kashkari, has been caught on tape providing the true details of what Treasury is up to. This will get him muzzled pretty fast, but it provides us the opportunity to see the scheming going on at Treasury. What a name Kashkari d*
http://www.economicpolicyjournal.com/2008/10/tape-blows-cover-on-true-treasury.html
forgot to post the link to Patrick Wood's article on the bailout http://www.augustreview.com/
(https://i36.photobucket.com/albums/e44/kathykrn/ScreenShot022.jpg)
Nice artwork Sassy. If I am not mistaken the Great Depression economy was corrected by WW2. If you believe that history repeats itself think about that. Obama, commander in chief in a major conflict. It looks like he is winning the two legged race. Every time I hear McCain & Palin anymore I just cringe. I really kind of like Joe Biden. And with Obama trying to redistribute the wealth of a lot of power players I don't know that he could survive a four year term in office.
Here are two disturbing videos that a family member sent me. This person thinks the current administration might make a grab for martial law powers.
http://www.youtube.com/watch?v=SpjNZXBoLd8&feature=email
http://www.youtube.com/watch?v=Ya9WnONk9Fw&feature=email
These are not nutcase reporters but careful readers of new laws. Maybe there's more going on here than I want to believe. :o :o
That's what I've been thinking for a long time. That's why Haliburton has built and is building more concentration camps as needed.
Shrub has been planning this for a long time. http://www.youtube.com/watch?v=aD3xfT0c99g
He has been making Illegal signing orders leading up to this for years. Not Constitutionally legal but he doesn't care -- he wipes his behind with it.
Hmmmm....The Queen must be pleased because they worked out some bailout issues with their bank. Mostly because of Briton, our futures are all green now.
Morgan Stanley's cash deal is a go with some mods (all preferred stock and lower conversion) That still works well for me but it sucks for their longer term stockholders.
No LIBOR today, oil is up, bond markets are closed, gold is down and the birds are singing. They don't know there is a cat in the bushes.
Iceland is a good place to see what MAY happen here if the meltdown continues.
http://dealbook.blogs.nytimes.com/2008/10/08/iceland-takes-drastic-steps-to-right-itself/
It looks like retailers there are not able to pay to restock their shelves so people are lined up to buy food.
In a way this is all interesting....in a morbid way.
I found this comment interesting from the TOPIX BLOG
InterestedOZ
Sydney, Australia
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#1
Saturday
Australia has been watching in both interest and sympathy. I am interested to hear how this has affected you in your general life? In areas of food, employment, loans, government support, civil unrest, etc. Also any thoughts on how to prepare for a similar situation to what you are in.
tonylaw
London, UK
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About from being told to prepare for the impending war with the u.k. nothing much has changed
Opinion on military deployment on US soil....happening right now since October 1st. Seattle, WA. You guys must be extra rowdy up there in the north.
Totally un-Constitutional - oh yeah --- that is buttwipe, sorry I forgot. d*
http://media.www.arbiteronline.com/media/storage/paper890/news/2008/10/13/Opinion/Military.Action.On.U.s.Soil-3483160.shtml
http://www.newswithviews.com/baldwin/baldwin472.htm
Gotta do it up north Glenn
If they come down south...we'll kick their asses! ;D
Way to go, Peter. heh
Interesting - Cancellation of the election has been talked about for a long time...
http://www.commondreams.org/archive/2007/07/31/2874
Have any of you read "Patriots, surviving the coming collapse" by Jim Rawles?
I just picked it up, very good read so far. An enthralling, terrifying vision of the future. Hard to put down.
I read it last year, rather terrible novel I thought at the time. It did however paint a picture that was terrifying, and give much useful information in the form of prose. How to make a house bulletproof, secure your doors, if you want to know part numbers for radios and milspec equipment thats the book to read up on. You you like doom and gloom, it's the equivalent of doom porn in my opinion.
I still cannot get my head around total martial law. That brigage in Colorado is some 3000 troops. Barely enough to maintain a city if needed, nowhere near large enough to perform what most people envision when they think about this stuff. Then there is the logistics of maintaining such a force.
What I learned from the hurricanes, Katrina, Rita, Ike; the government wont come to help you; you must help and protect yourself. If you go to aid camps you will see horrible things. I think it is more believable these concentration camps everyone fears will have an open gate and the radio will tell people to go there for food, water, medicine, and protection. Yes they may have work programs people are expected to participate in. 90% of the population would need this to survive a month and gladly accept it.
I still do not know that we will crash in the sense that many have predicted. One thing I do know is that no matter what happens these politicians and bankers are not going to just pack their bags and go home. This weekend they threw the entire kitchen sink at the credit and equities markets as a dozen or so governments guaranteed everything and committed to print our way out of this crises. We went from central banks being lender of last resort to central banks being the only lender. This is not an American problem, this is a global problem now. It also is not a financial sector problem any longer, it is a governmental problem now. I do not know if this approach will work, but I know the wheels were literally coming off the bus last week and it would have ended in the "patriots" scenario if left alone. Now the troubles of those banks are the troubles of our collective world governments. Perhaps we bankrupted every single one of them over the weekend; but were in this together.
Past collapses, Argentina, Weimar, Zimbabwe, and others were not global in nature. They were one countries descent and the rest of the world isolated them and let them burn. Much like what the world did to Iceland just last week. However if everyone is on fire does the rest of the world do the same thing or is there an attempt to collectively pull out? They are now trying the latter, who knows if it will work. Much of the global currency market is relational, by that I mean when a currency goes up it is gaining on others or merely benefiting from the downturn of others. If they all go down, did anyone's? If we all lose everything, is anyone really poor?
I am sick and tired of fear.
I can't picture you afraid muldoon.
Just sit back and watch. Whatever happens...happens. You can't stop it, just deal with it when it comes.
I found this disturbing.
10/13 : Fed offers unlimited support
http://money.cnn.com/2008/10/13/news/economy/central_banks_dollar_funds/?postversion=2008101307
Me too bishop, I find the entire set of events of the last month very disturbing.
If you guys have 3.5 hours to spare today you might want to watch this set of movies. http://www.chrismartenson.com/crash-course I don't agree with everything he has to say, (especially on oil) but he gets quite a bit of stuff right. I don't know how the story ends in the real world, but nothing is off the table right now in my opinion. This might provide some additional background information to the story.
It seems everyone liked what the masters did. I just sold the Morgan Stanley I bought Friday for 17.97. ;D ;D ;D ;D
well, let's see what the bond market thinks about giving everyone free money and printing our way out of this tomorrow. They usually show an understanding of the exponential function. We cant say everyone's happy till they weigh in. That being said, free money for everyone, unlimited guarantees, no one can be allowed to fail no matter how much risk they take, great time to buy buy buy and lend lend lend. it sounds like a financially sound plan right?
Greatest DJIA Daily % Gains of All-Time
Rank Date Close Net Chg % Chg
1 15.03.1933 62,10 +8,26 +15,34
2 06.10.1931 99,34 +12,86 +14,87
3 30.10.1929 258,47 +28,40 +12,34
4 21.09.1932 75,16 +7,67 +11,36
5 21.10.1987 2.027,85 +186,84 +10,15
6 03.08.1932 58,22 +5,06 +9,52
7 11.02.1932 78,60 +6,80 +9,47
8 14.11.1929 217,28 +18,59 +9,36
9 18.12.1931 80,69 +6,90 +9,35
10 13.02.1932 85,82 +7,22 +9,19
What did the bond market do back then? it collapsed and we entered a decade long depression.
Short covering, bargin shopping and government money buying stocks pushed the market up today. Look for it to go back down in the comming days.
I don't know why but Seattle is a place where a lot of urban unrest first surfaces.
Maybe it's suppressed anger at authorities (Seattle is one of the few cites that actually obey the walk/don't walk signs). We wouldn't think of jaywalking, but we're the first to get rowdy about the WTO. >:(
Then again maybe it's just a powerful combination of not enough sunshine and too much coffee. :D
Quote from: ScottA on October 13, 2008, 03:32:05 PM
Short covering, bargin shopping and government money buying stocks pushed the market up today. Look for it to go back down in the comming days.
Short covering started it in pre market and continued into opening (I'm talking about MS) Then the wishIhads and Momentum buyers started. Your right Scott....It will go down, maybe not tomorrow but I'm sure this week. The problem is still there. It is possible, not probable but possible, MS tries to fill the gap tomorrow. I'm out until the next crisis, so I don't really care.
But all I can do about the problem is watch it. Until the stores start taking barter, I'll keep working this unbelievably predictable market. There was some serious money made today. I made enough to buy another piece of land (at discount prices) but I talked to several people that officially retired today.
I don't know how long this rally lasts, it honestly could be weeks to months. It depends on a few variables, notably credit markets and bond markets. If credit opens and banks lend it could go on much longer than a week. If the bond market plays ball too it could last till the end of the year.
Again, I wouldn't say anything is off the table right now. We are literally in uncharted waters. I wont be playing this market for the most part at all. I have some puts on TLT and thats it. This is part of my bet that I think treasuries get hammered over this bailout. (it's gambling not investing). I picked up leap puts on a 100 strike price and am already way up, I think this can get some real legs in the next few days tho.
I have been giving this whole thing a lot of thought and have 4 or 5 plausible scenarios as for where we go from here. I'll try to post them tomorrow if time allows. I cant post the details, but things are shaky at work right now so I'm not sure how much time I'll have.
I have started a fresh Monday night thread with a new George Friedman update from Stratfor.
http://countryplans.com/smf/index.php?topic=5392.msg68393#msg68393
Question to those interested in these economic issue threads:
Would it make sense to have this discussion in one long thread where all updates are threaded by posting times? Or, should we leave it the way it is now, freely open to the creation of new economic themed threads?
I like it separate but I'm a minor here, and will leave it to the pros to decide...and I'll just follow along which ever way it goes.
Here's a little something for you Glenn.
From a 60's radical, 70's ski instructor, 80's Government Official, 90's business owner, 2000's Redneck Radical and hermit in training c*
http://www.youtube.com/watch?v=WhNM2K8cmU8
Quote from: John Raabe on October 14, 2008, 12:40:01 AM
Question to those interested in these economic issue threads:
Would it make sense to have this discussion in one long thread where all updates are threaded by posting times? Or, should we leave it the way it is now, freely open to the creation of new economic themed threads?
It's up to you John, I'll try to follow any posting guidelines you set. I imagine others would as well.
I would prefer to be able to let old threads die off and start new ones as time wears on. On the same hand I don't think we need more than just a few going at any time either. I think were all trying to collectively figure out where we stand and where were headed so whatever is easiest for the other folks is fine with me.
Quote from: peternap on October 14, 2008, 01:39:36 AM
Here's a little something for you Glenn.
From a 60's radical, 70's ski instructor, 80's Government Official, 90's business owner, 2000's Redneck Radical and hermit in training c*
http://www.youtube.com/watch?v=WhNM2K8cmU8
Crimoney -- Peter --- that's an oldie --- and I remember it --- we couldn't possibly last that long could we?
Looks like the market is dropping off a bit already this morning. Of course it could all change in an hour or two. Manic depressive. How is the popcorn holding out Peter? c*