The Times Today:
Alistair Darling ignores the looming collapse of financial institutions - Times Online Alistair Darling ignores the looming collapse of financial institutions
Alistair Darling's footling initiatives yesterday were a sideshow. There is one overwhelming challenge facing the business world and it is not going to be addressed by £10 million more for science teachers or £12 million for women entrepreneurs.
Western capitalism is, bluntly, being haunted by the spectre of a catastrophic domino-like collapse of financial institutions, one that if not prevented would without question lead to an economic ice age.
Mr Darling did at least acknowledge that a number of credit markets were “barely functioning” but then moved on to more trifling matters. Outside Westminster, however, fears remain that a major financial institution is close to collapse, or that policymakers at least believe it could be. Nothing else explains Tuesday's co-ordinated campaign by central banks and their increasingly desperate measures to pump more liquidity into a system showing fresh signs of paralysis. As one senior City figure put it yesterday: “There's the smell of death all right but no one can locate the corpse.”
En masse, the world is de-leveraging. On an individual level, moves by banks to call in debt and tighten loan conditions make perfect sense. Collectively, they could be devastating. Asset fire sales lead to falling prices which lead to shrinking collateral values and the need for more fire sales. It would not take all that much to tip the credit markets from the current state of paralysis (bad) to panic (much worse).
...And so it continues. Maybe I should start a poll - which Bank to go bust first (obviously excluding NR and the ones that already have...)