This is one of those moments when you really have to look at reality and say what the hell is going on here. If I understand this correctly, and I think I do, Merrill Lynch Price Fenner and Bean or whatever they're called these days has been selling itself like a $2 Crack Whore with limited success. Seems nobody's in the market for rags. Lehman is just about tits up, and the Fed is jumping in to fix them. Meanwhile, AIG has supposedly told the people it had been trying to scrape some cash from to forget it, they're going to depend on the Federal Reserve. That's interesting, because last time I looked, the FED didn't do a lot for insurance companies. So, we'll see how this plays out.
However, before IOZ gets his piece up to point out that these moves effectively nationalizes a lot of the banking, mortgage, lending and investment industry, he's right. And, that better scare people a lot. Although most of the uninitiated liberal arts graduates may not know this, and a lot of businessmen are confused by it, finance and accounting are separate disciplines. Finance is really about taking and hedging risk; accounting is about counting. One looks at what can be, the other at what is. Helluva difference. For a long time, the Fed has been in the hands of the financiers, excited by things like the Laffler Curve and Ayn Rand. Both equally ridiculous. The basic function underlying banking is counting and double entry bookkeeping. If the numbers don't add up, the numbers don't add up. If they do, they do. No matter how hard you try, assets have to equal liabilities and retained value. If not, you're screwed.
Now, there are some fairly radical -- actually, extraordinarily radical -- acts that could flow from this clusterfuck. As we all know, McCain isn't good with numbers and doesn't understand the economy, arithmetic or much of anything else. Palin is obviously confused on where the money comes from or where it goes or how to count it. Obama is a lawyer and a legislator with experience in a big state's Senate. Biden is from Delaware, the home of the corporate soul in this country. We used to look to the Democrats for grand visions and Republicans for fiscal sense. We are now going to be forced to look at everything with a different lens.
Most of us are not going to be hurt by the Merrill/Lehman/AIG debacle. However, the collateral damage of this nuclear meltdown will be amazing. I'm thinking about turning all the IRAs and 401Ks and pocket change in AXE Manor into doubloons. In the long run, unless the world craters, my investments are pretty safe. Problem is, in the long run, I'll be dead.
I was driving past the local Dodge dealership when I noticed a used Vette for $299 down. I got interested, and stopped. They pounced on me, but when I learned that the car had 70Kplus on it, I didn't even ask for the price. I looked at a couple of new Chargers, and was told that the cost out the door would be sticker minus $3k plus title, tax and license. Kid who was trying to sell me something I didn't really want and already have said that, "Well, you can't be sure how long the rebates will last." "Yeah, sure. Until the economy turns around." While there will be increased "specials," anyone who's been engaged in speculation --and basically, the car companies and anyone who builds an inventory in the hopes of selling it are speculating -- look for a lot of unemployment. Companies will not be able to borrow money to expand or to cover costs while waiting for receivables -- payments -- to come in. Homebuilders, for example, live on speculation. Not going to be possible to get the construction loans at an affordable rate, if at all. Consumer goods in general once you get beyond necessities will suffer. Things are going to hurt. And, not just here -- in fact, we're sorta insulated even today. But, it sucks right now to be an entrepreneur in China, seeking cash to start a clothing store for pets in Guanzhou, or the operator of a Bed and Breakfast in Surrey.
They are calling tomorrow "Bloody Monday" and yet, no major news television outlets seem to be covering this crises. Simply STUNNING.
Posted by: HelenWheels | 14 September 2008 at 10:00 PM