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By: Igor Greenwald, 9:31 AM ET on 10/6/08
WHERE DID ALL the money go? The same place it came from: the thin air of high finance. All the bailouts, liquidity injections and nationalizations in the world won't bring it back it seems, because it was never there in the first place except as an abstraction -- arbitrary sums derived from a vast private pyramid scheme that happened to rely on lending instead of investment.
Frazzled governments were once again putting out fires overnight; a guarantee of bank deposits there, urgent talks on divvying up Wachovia here. This didn't stop Asian stocks from plunging 3% to 5%. Europe was looking no better. The global credit contagion was spreading rapidly to the countries and companies most heavily in debt and to the lenders most at risk, from South Korea to Iceland and from Germany's Hypo Real Estate back to Ohio's National City.
Derivatives guru and vindicated prognosticator of the calamity upon us, Satyajit Das, cheerfully titled his blog post Saturday "End of the Beginning," which in the context of this crisis means we're still some ways off from the beginning of the end. Das borrows some gallows humor from Lily Tomlin to clarify the take-away: "Things are going to get a lot worse before they are going to get worse."
This morning Das was at it again, citing Springsteen as well as Yeats to get readers of Australia's Business Spectator properly depressed. But the money quote in that piece was a Depression-era explanation of the goings on as offered to Herbert Hooover by his Treasury Secretary: "Liquidate labour, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system..."
Das persuasively argues that we're not there yet, and in fact far from it as the deleveraging and the resulting credit crunch in the financial sector choke the rest of the global economy, requiring more deleveraging still. What's curious is that despite describing the global nature of the problem so well, Das still falls into the camp that sees the crisis as particularly bad news for the U.S. and for the U.S. dollar.
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http://www.smartmoney.com/blog/index...ry&entryID=759
WHERE DID ALL the money go? The same place it came from: the thin air of high finance. All the bailouts, liquidity injections and nationalizations in the world won't bring it back it seems, because it was never there in the first place except as an abstraction -- arbitrary sums derived from a vast private pyramid scheme that happened to rely on lending instead of investment.
Frazzled governments were once again putting out fires overnight; a guarantee of bank deposits there, urgent talks on divvying up Wachovia here. This didn't stop Asian stocks from plunging 3% to 5%. Europe was looking no better. The global credit contagion was spreading rapidly to the countries and companies most heavily in debt and to the lenders most at risk, from South Korea to Iceland and from Germany's Hypo Real Estate back to Ohio's National City.
Derivatives guru and vindicated prognosticator of the calamity upon us, Satyajit Das, cheerfully titled his blog post Saturday "End of the Beginning," which in the context of this crisis means we're still some ways off from the beginning of the end. Das borrows some gallows humor from Lily Tomlin to clarify the take-away: "Things are going to get a lot worse before they are going to get worse."
This morning Das was at it again, citing Springsteen as well as Yeats to get readers of Australia's Business Spectator properly depressed. But the money quote in that piece was a Depression-era explanation of the goings on as offered to Herbert Hooover by his Treasury Secretary: "Liquidate labour, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system..."
Das persuasively argues that we're not there yet, and in fact far from it as the deleveraging and the resulting credit crunch in the financial sector choke the rest of the global economy, requiring more deleveraging still. What's curious is that despite describing the global nature of the problem so well, Das still falls into the camp that sees the crisis as particularly bad news for the U.S. and for the U.S. dollar.
...
http://www.smartmoney.com/blog/index...ry&entryID=759
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