Oil's energy contribution has declined by about 12% since 1999. The world's economies have also declined by about 12%. (Using conventional metrics, which are time delayed determinations, this will only be seen in hind sight). The massive destruction of asset values now occurring testifies to it happening.
Peak is well behind us, world economies have peaked and will continue to decline.
Joined: Jun 18, 2005 Posts: 3985 Location: In a van down by the river
Posted: Thu Sep 18, 2008 11:29 am Post subject: NO bids on libor.
This means no banks are lending to each other, and after the largest world wide liquidity injection ever by FCB's and the Fed, the banking market is in complete lock up.
If this continues any amount of time Banks that need cash badly go TU in a hurry.
Posted: Thu Sep 18, 2008 11:43 am Post subject: Re: NO bids on libor.
What does this mean to us? Are the banks going to run out of funds, or are they not borrowing because the rate was too high or what? _________________ Deep in the mud and slime of things, even there, something sings.
Posted: Thu Sep 18, 2008 11:45 am Post subject: Re: NO bids on libor.
I searched it for you. Quite a few stories out there available. Link _________________ Live simply, love generously, care deeply, and speak kindly.
Life isn't about waiting for the storm to pass;
It's about learning how to dance in the rain.
Posted: Thu Sep 18, 2008 11:48 am Post subject: Re: NO bids on libor.
Revi wrote:
What does this mean to us? Are the banks going to run out of funds, or are they not borrowing because the rate was too high or what?
Nobody would have any money, basically, except what is in your pocket. Business orders and commerce would freeze. Small banks that need loans (might be on the verge of being in trouble) are SOL.
Posted: Thu Sep 18, 2008 11:52 am Post subject: Re: NO bids on libor.
Jotapay wrote:
SmallALL banks that need loans (might be on the verge of being in trouble) are SOL.
Sorry, just a minor correction. _________________ The whole of human history is a refutation by experiment of the concept of "moral world order". - Friedrich Nietzsche
Posted: Thu Sep 18, 2008 12:28 pm Post subject: Re: NO bids on libor.
Jotapay wrote:
HEADER_RACK wrote:
In other words DEFLATION
Yep. The only dollars that would exist would be in your pocket. Or else you barter some bullets for those chickens there, etc.
It's not deflation, it is total systemic financial collapse. It always was a possiblity. I still don't think it's the most likely outcome, but I guess we're about to find out in short order.
Posted: Thu Sep 18, 2008 12:35 pm Post subject: Re: NO bids on libor.
sjn wrote:
Jotapay wrote:
HEADER_RACK wrote:
In other words DEFLATION
Yep. The only dollars that would exist would be in your pocket. Or else you barter some bullets for those chickens there, etc.
It's not deflation, it is total systemic financial collapse. It always was a possiblity. I still don't think it's the most likely outcome, but I guess we're about to find out in short order.
So can deflation become hyperinflation? If the only dollars that exist are the ones in your pocket, at what point do those dollars become worthless? Is that when they run the printing press like crazy?
Posted: Thu Sep 18, 2008 1:45 pm Post subject: Re: NO bids on libor.
la2al2tex wrote:
sjn wrote:
Jotapay wrote:
HEADER_RACK wrote:
In other words DEFLATION
Yep. The only dollars that would exist would be in your pocket. Or else you barter some bullets for those chickens there, etc.
It's not deflation, it is total systemic financial collapse. It always was a possiblity. I still don't think it's the most likely outcome, but I guess we're about to find out in short order.
So can deflation become hyperinflation? If the only dollars that exist are the ones in your pocket, at what point do those dollars become worthless? Is that when they run the printing press like crazy?
This won't be allowed to completely seize up financial markets (this time). There may be some bank runs and such, but the fed will capitalize it.
To understand what is going on, you have to realize there is a 'velocity' component to money that gives it a multiplier effect. ie, the more times money changes hands in a given period of time the more financial 'work' it does.
When the velocity drops, which it is doing now (plummeting), then the easiest way to get the markets going again is to make more money. Think of it as (money) * (velocity).
This is not me blowing my opinion out btw, it's a well known economic principle: Velocity
The problem with the printing of money solution to economic activity is that, once economic activity starts going up again (ie, velocity starts to rise) it usually rises very rapidly. The printed money gets 'stored' until deflation turns to inflation. When people see that assets are rising and cash is devaluing (after deflation has abated), the floodgates of all that pre-printed money opens up. Velocity spikes as everyone begins to spend the saved up money, and you can wind up with hyperinflation.
That *might* still happen here, but right now we are just at the beginning of the deflationary phase. What we are seeing right now is the Fed and Treasury attempting to fend off deflation. _________________ Welcome to the Kondratieff Winter
Posted: Thu Sep 18, 2008 3:50 pm Post subject: Re: NO bids on libor.
Money Market Stress
Quote:
September 18th, 2008 12:36 pm
The money market is in a severe state of disruption in spite of the massive liquidity injection by the central banks of the world. Three month Libor for tomorrow is 3.40 percent bid and as of a few minutes ago there was no offer. Investors are allocating funds to the overnight market and that has prompted a bit of a scramble in the longer maturities such as the three month sector.
There was other troubling news, too. The Federal Reserve in a standard weekly announcement revealed that CP outstanding had declined by$52 billion in the week which ended at the close of business yesterday.
Additionally, the Colorado Diversified Trust with assets of about $200 million was not diversified enough and its exposure to Lehman caused it to break the buck. The fund ministers to local schools and governments in Colorado.
This was another source of tension and intensified the reexamination of portfolio holding by investors.
Finally, in a real world example of the extreme difficulty of funding at a reasonable rate, a AA rated bank paid 4.00 percent for $50 million of two week money. That demonstrates the significant pressure that even the most stellar names are facing.
If this doesn’t break, we will see a deflationary credit collapse. Either no one has the money to lend out or if they do have money, they don't trust the other side of the trade to be there the next morning so they can get repaid.
If the commercial paper market continues to freeze up like this, it also means businesses in every industry are going to seize up. They simply will not be able to do business, fill orders, etc.
Other bad news
Quote:
Washington Mutual auction does not attract any bids-FT
The auction is being conducted by Goldman Sachs (GS), which has approached a number of banks, including Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC), according to people close to the situation. The lack of interest in WaMu means that Goldman may evaluate other options, including raising capital by selling off attractive assets, or attempting to raise fresh capital to allow the bank to stand alone.
Money Market Funds are also freezing up. The only other place to destroy creditworthiness is top-rated commercial paper from non-financial corps and T-bills.
Quote:
Banks abruptly stopped lending to each other or charged exorbitantly high rates Tuesday, threatening to spread the troubles of American International Group Inc. and Lehman Brothers Holdings Inc. to a broad range of financial institutions and the global economy.
Quote:
* Net foreign purchases of long-term U.S. securities were negative $25.6 billion. Of this, net purchases by private foreign investors were negative $20.7 billion, and net purchases by foreign official institutions were negative $4.9 billion.
In the face of potentially huge gasoline and diesel shortages, this could create a catastrophic set of events that would shut the entire economy down!
The Fed will add even more money if this doesn't work Friday, and if it that doesn't help, they might step in around the world trying to supply money directly.
If they resort to something like that, it could become a trigger for a worldwide dollar meltdown. It may not be too far away based upon the figures in the TIC report shortonoil quoted above. _________________ It's already over, now it's just a matter of adjusting.
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