Thread: A note of caution for those with deposits in US Banks

^^^Now, I haven't added all those losses up, but they amount to quite a bit for a company that Butterfly claims is in "limited difficulty". If he would only explain this 'fact' to each of the companies listed, they save shed loads of cash!

Originally Posted by DrAndy

Originally Posted by bkkandrew

Originally Posted by DrAndy

Originally Posted by bkkandrew

^I know you are old and infirm, so I will try and help you.

Perhaps you are too elderly for complex matters discussed on this type of thread. I hear DD has some soup-cooking threads. Why don't you try those?

Oh you are trying the ageism card, jolly good

can you tell me my age please? or are you just following the crowd, like most financial "experts"?

You are one of those who shout and jump around when someone predicts something you don't agree with, then, after they have been proven right, point a finger and say "that is what I said", or "I said that in February"

of course you did, you are a financial "expert"
expert at following the crowd

and boring too

68.

Anyway, if you cannot follow a simple thread, when given links and post numbers, most people would draw their own conclusions.

As I have just said, being patronising is merely the resort of the ignorant, Your link was incorrect; if you read it there was nothing in it that made any connection with what you had said. We are not all mind readers. Post numbers? maybe in a different post?

and I am nowhere near 68, so much for numerical astuteness!

The post numbers were in the post you were quoting. You managed to delete them when quoting them. Another example of the effects of age on the mind I would suggest.

Originally Posted by DrAndy

Originally Posted by bkkandrew

Originally Posted by Spin

Originally Posted by Butterfly

Check the stories

You are quite right, as per this Lehman press release link
It quite clearly states, at the top of the document in huge bold text.....

"LEHMAN BROTHERS HOLDINGS INC. ANNOUNCES IT INTENDS TO FILE CHAPTER 11 BANKRUPTCY PETITION; NO OTHER LEHMAN BROTHERS’ U.S. SUBSIDIARIES OR AFFILIATES, INCLUDING ITS BROKER-DEALER AND INVESTMENT MANAGEMENT SUBSIDIARIES, ARE INCLUDED IN THE FILING"

Yes - and its assets are now being/have been sold off, including subsidiaries. For example, Wall Street Head Office building sold to Barclays. Japanese equities business and London equities business to Nomura.

If they are not bankrupt, then someone ought to tell the following list of companies that have reported loss as a result of the bankruptcy:

DOW JONES NEWSWIRES

yadda yadda yadda
.

once again you have not read the posts

all those exposures are to the bankrupt Lehman Bros Holdings, not the rest of Lehman Bros subsids or affiliates

as was clearly stated in the post you quoted

Which is why I included the sale of some of Lehman subsidiaries in my post. If you were younger and more alert, you would have read the following from my post:

Yes - and its assets are now being/have been sold off, including subsidiaries. For example, Wall Street Head Office building sold to Barclays. Japanese equities business and London equities business to Nomura.

you have no idea of my age, as you have already shown, so maybe you had better stop making a fool of yourself

There is no point in arguing with someone who keeps repeating the same mistakes and thinks that makes them true

^So why did you delete my post numbers when quoting my post and then claim that they were not there?

The chaos in the banking sector is now creating similar chaos in the area of corporate debt. This is where, to coin a horrible phrase, Wall Street impacts on Main Street.

I give you AT&T:

AT&T woes highlight money market stress
By Anousha Sakoui and Gillian Tett in London

Published: October 2 2008 01:17 | Last updated: October 2 2008 01:17

AT&T, the American telecoms giant, has admitted it was forced to rely on ultra-short-term financing for its regular treasury operations as a result of the broader global crisis in the money markets.

Randall Stephenson, chairman and chief executive, said his company had last week been unable to sell any commercial paper for terms longer than overnight.

“It’s loosened up a bit, but it’s day-to-day right now. I mean literally it’s day-to-day in terms of what our access to the capital markets looks like,’’ he said.

The company pointed out that conditions had improved this week. “We have full and ready access to the commercial paper market. We are having no issues accessing various terms, and we are getting reasonable rates. There were a couple of days last week where access was limited to overnight, but that was brief,” AT&T said.

The admission highlights the degree of stress now faced by the corporate world – not least because AT&T is in a stronger position than most other corporate groups operating in the commercial paper sector since it commands a high credit rating.

The situation is likely to be closely scrutinised by policymakers in the coming days, since officials such as Hank Paulson, US Treasury secretary, have indicated that one factor now worrying the US government is a fear the financial turmoil could soon spark new chain reactions that would spread to the wider US business world.

The commercial paper market has traditionally been used as a key avenue through which mainstream companies can raise short-term finance to use for day-to-day operations.

Money market funds have provided a key source of demand for the CP notes – a pattern that used to ensure funding costs were relatively low and stable.

Over the past few weeks, the sector has been thrown into turmoil by the wider financial crisis.

As a result many money market participants are now refusing to purchase any notes that last for more than a day or two – partly because they fear they could face investor redemptions.

To compensate for this, some large companies are believed to have drawn on pre-agreed credit facilities with their banks.

Some banks have privately warned corporate clients that they may soon seek to renegotiate the terms of this debt.

From:

FT.com / Companies / Telecoms - AT&T woes highlight money market stress

Originally Posted by DrAndy

There is no point in arguing with someone who keeps repeating the same mistakes and thinks that makes them true

ah that's not true DrAndy, if you keep repeating a lie long enough, eventually you start to believe in it. Obviously bkka has a lot of practice

anyway, bkka showing again his misunderstand of bankruptcy laws, and what is bankruptcy, still confusing it with liquidation or defaulting, this is too funny !!!

Originally Posted by bkkandrew

Originally Posted by Butterfly

Originally Posted by bkkandrew

the bank that Butterfly described as having a "limited difficulty"

I thought that was B&B, or are you trying again to put things in my mouth ? in the case of LBH, I believe they are being restructured.

No, you were referring to Lehman, which you admitted to here:

https://teakdoor.com/us-domestic-issu...tml#post784179

Lehman being restructured?

Their Head Office on Wall St. has been sold off to Barclays. The have gone bankrupt with a loss of $350BN being the latest estimate of bankrutcy shortfall, staff have been fired and the former CEO will probably face jail. Some restructure! I am glad I don't work in the same office as you...

this is the whole post, the true post and nothing but the post

where is the post number you quoted in it? there is only the link

before you accuse someone of doing something, maybe it would be better to check the facts?

Financial "experts" are a little like fortune tellers, they predict all sorts of things and then pick out the occasional one where they have turned out to be more or less correct, conveniently forgetting the majority of times they were wrong

Originally Posted by Butterfly

Originally Posted by DrAndy

There is no point in arguing with someone who keeps repeating the same mistakes and thinks that makes them true

ah that's not true DrAndy, if you keep repeating a lie long enough, eventually you start to believe in it. Obviously bkka has a lot of practice

anyway, bkka showing again his misunderstand of bankruptcy laws, and what is bankruptcy, still confusing it with liquidation or defaulting, this is too funny !!!

well BF, it would all depend on how intelligent he actually is, as opposed to how intelligent he thinks he is

his posting content does tend to show that the former is quite a bit lower than the latter

but he is just a young chap who thinks that anyone over 45 is ancient

Originally Posted by DrAndy

Originally Posted by bkkandrew

Originally Posted by Butterfly

Originally Posted by bkkandrew

the bank that Butterfly described as having a "limited difficulty"

I thought that was B&B, or are you trying again to put things in my mouth ? in the case of LBH, I believe they are being restructured.

No, you were referring to Lehman, which you admitted to here:

https://teakdoor.com/us-domestic-issu...tml#post784179

Lehman being restructured?

Their Head Office on Wall St. has been sold off to Barclays. The have gone bankrupt with a loss of $350BN being the latest estimate of bankrutcy shortfall, staff have been fired and the former CEO will probably face jail. Some restructure! I am glad I don't work in the same office as you...

this is the whole post, the true post and nothing but the post

where is the post number you quoted in it? there is only the link

before you accuse someone of doing something, maybe it would be better to check the facts?

Yes - you said the link didn't work, which it did - it pointed post 669, which was addressing my post 668, which I stated here:

https://teakdoor.com/us-domestic-issu...tml#post785870

But when you quoted this post here:

https://teakdoor.com/us-domestic-issu...tml#post786651

You deleted the post numbers, only to claim here:

https://teakdoor.com/us-domestic-issu...tml#post786806

That you didn't know the post numbers!

Attention-span failure again DrA?

Originally Posted by DrAndy

Financial "experts" are a little like fortune tellers, they predict all sorts of things and then pick out the occasional one where they have turned out to be more or less correct, conveniently forgetting the majority of times they were wrong

Well, lets have a checklist:

• My OP on this thread, posted in January, contained a prediction of bank failure of Wachovia;
• In March I included WaMu for failure on this thread;
• In April I predicted the failure of insurers that insured mortgage debt, e.g. AIG;
• In May I predicted the failure of B&B and HBOS;
• Last month (to howls of derision from Butterfly et al) I predicted Martial Law in the US. I note that this was a threat made in the bailout debate in Congress yesterday.

I am turning out to be quite a lucky 'fortune teller', aren't I?

Buy-to-let hotel rooms group GuestInvest in administration

The company that introduced the concept of buy-to-let hotel rooms, boasting that investors could "earn money while others sleep", fell into administration yesterday.

GuestInvest owned Blakes Hotel in London's Mayfair and was developing a string of other hotels, including one on the site of the former Whitbread Brewery in the City of London. HBOS owned 19.9% of the company.

Hundreds of investors paid upwards of £250,000 for a GuestInvest hotel room where they earned 50% of the room rate plus the right to stay for 52 nights a year. The rooms at Blakes were on sale for £1m each but were rumoured to have found few buyers.

Its advertisements were plastered across London's transport network and initially, while hotel occupancy rates were buzzing and finance was cheap, investors earned returns of about 10% a year.

In 2006, founder Johnny Sandelson entered into a £140m joint venture with HBOS to finance new acquisitions, and brought in financier Sir Mark Weinberg as a non-executive director. Amid poor sales and slowing hotel occupancy rates in London it appointed Deloitte as administrators yesterday. Joint administrator Nick Edwards said he had immediately secured the future of Blakes but is assessing the future of the group's other assets and the position of investors.

"The Blakes Hotel is unaffected by the insolvency of the GuestInvest Group. It is a very prestigious trading asset and is not subject to any form of insolvency proceeding. Blakes continues to trade as usual."

Firms which acted for buy-to-let investors pointed the finger of blame at HBOS.
Stuart Law, chief executive of property investment firm Assetz ,said: "It is very sad to hear the news that GuestInvest has gone into administration following an HBOS reduction in lending facility and we hope that a new owner comes forwards shortly."

Others blamed GuestInvest for overspending on acquisitions and development projects.

From:

Buy-to-let hotel rooms group GuestInvest in administration | Business | The Guardian

My bold. What a lunatic idea - and what lunatic at HBOS thought it was a great idea to throw £140M at it?

Originally Posted by DrAndy

Originally Posted by bkkandrew

Originally Posted by Spin

Originally Posted by Butterfly

Check the stories

You are quite right, as per this Lehman press release link
It quite clearly states, at the top of the document in huge bold text.....

"LEHMAN BROTHERS HOLDINGS INC. ANNOUNCES IT INTENDS TO FILE CHAPTER 11 BANKRUPTCY PETITION; NO OTHER LEHMAN BROTHERS’ U.S. SUBSIDIARIES OR AFFILIATES, INCLUDING ITS BROKER-DEALER AND INVESTMENT MANAGEMENT SUBSIDIARIES, ARE INCLUDED IN THE FILING"

Yes - and its assets are now being/have been sold off, including subsidiaries. For example, Wall Street Head Office building sold to Barclays. Japanese equities business and London equities business to Nomura.

If they are not bankrupt, then someone ought to tell the following list of companies that have reported loss as a result of the bankruptcy:

DOW JONES NEWSWIRES

yadda yadda yadda
.

once again you have not read the posts

all those exposures are to the bankrupt Lehman Bros Holdings, not the rest of Lehman Bros subsids or affiliates

as was clearly stated in the post you quoted

It would seem that the term 'Bankruptcy' is not well understood by all posters. Aside from the fact that the term means different things in the US and the UK, it is generally being used on this thread as a synonym for 'insolvency' which it is not.

Bankruptcy is only declared by a court. Firms and individuals cannot 'declare' bankruptcy.

I wish I could claim that I'm nowhere near 68.

How AIG's Collapse Began a Global Run on the Banks
By Porter Stansberry

Something very strange is happening in the financial markets. And I can show you what it is and what it means...

If September didn't give you enough to worry about, consider what will happen to real estate prices as unemployment grows steadily over the next several months. As bad as things are now, they'll get much worse.

They'll get worse for the obvious reason: because more people will default on their mortgages. But they'll also remain depressed for far longer than anyone expects, for a reason most people will never understand.

What follows is one of the real secrets to September's stock market collapse. Once you understand what really happened last month, the events to come will be much clearer to you...

Every great bull market has similar characteristics. The speculation must – at the beginning – start with a reasonably good idea. Using long-term mortgages to pay for homes is a good idea, with a few important caveats.

Some of these limitations are obvious to any intelligent observer... like the need for a substantial down payment, the verification of income, an independent appraisal, etc. But human nature dictates that, given enough time and the right incentives, any endeavor will be corrupted. This is one of the two critical elements of a bubble. What was once a good idea becomes a farce. You already know all the stories of how this happened in the housing market, where loans were eventually given without fixed rates, without income verification, without down payments, and without legitimate appraisals.

As bad as these practices were, they would not have created a global financial panic without the second, more critical element. For things to get really out of control, the farce must evolve further... into fraud.

And this is where AIG comes into the story.

Around the world, banks must comply with what are known as Basel II regulations. These regulations determine how much capital a bank must maintain in reserve. The rules are based on the quality of the bank's loan book. The riskier the loans a bank owns, the more capital it must keep in reserve. Bank managers naturally seek to employ as much leverage as they can, especially when interest rates are low, to maximize profits. AIG appeared to offer banks a way to get around the Basel rules, via unregulated insurance contracts, known as credit default swaps.

Here's how it worked: Say you're a major European bank... You have a surplus of deposits, because in Europe people actually still bother to save money. You're looking for something to maximize the spread between what you must pay for deposits and what you're able to earn lending. You want it to be safe and reliable, but also pay the highest possible annual interest. You know you could buy a portfolio of high-yielding subprime mortgages. But doing so will limit the amount of leverage you can employ, which will limit returns.

So rather than rule out having any high-yielding securities in your portfolio, you simply call up the friendly AIG broker you met at a conference in London last year.

"What would it cost me to insure this subprime security?" you inquire. The broker, who is selling a five-year policy (but who will be paid a bonus annually), says, "Not too much." After all, the historical loss rates on American mortgages is close to zilch.

Using incredibly sophisticated computer models, he agrees to guarantee the subprime security you're buying against default for five years for say, 2% of face value.

Although AIG's credit default swaps were really insurance contracts, they weren't regulated. That meant AIG didn't have to put up any capital as collateral on its swaps, as long as it maintained a triple-A credit rating. There was no real capital cost to selling these swaps; there was no limit. And thanks to what's called "mark-to-market" accounting, AIG could book the profit from a five-year credit default swap as soon as the contract was sold, based on the expected default rate.

Whatever the computer said AIG was likely to make on the deal, the accountants would write down as actual profit. The broker who sold the swap would be paid a bonus at the end of the first year – long before the actual profit on the contract was made.

With this structure in place, the European bank was able to assure its regulators it was holding only triple-A credits, instead of a bunch of subprime "toxic waste." The bank could leverage itself to the full extent allowable under Basel II. AIG could book hundreds of millions in "profit" each year, without having to pony up billions in collateral.

It was a fraud. AIG never any capital to back up the insurance it sold. And the profits it booked never materialized. The default rate on mortgage securities underwritten in 2005, 2006, and 2007 turned out to be multiples higher than expected. And they continue to increase. In some cases, the securities the banks claimed were triple A have ended up being worth less than $0.15 on the dollar.

Even so, it all worked for years. Banks leveraged deposits to the hilt. Wall Street packaged and sold dumb mortgages as securities. And AIG sold credit default swaps without bothering to collateralize the risk. An enormous amount of capital was created out of thin air and tossed into global real estate markets.

On September 15, all of the major credit-rating agencies downgraded AIG – the world's largest insurance company. At issue were the soaring losses in its credit default swaps. The first big writeoff came in the fourth quarter of 2007, when AIG reported an $11 billion charge. It was able to raise capital once, to repair the damage. But the losses kept growing. The moment the downgrade came, AIG was forced to come up with tens of billions of additional collateral, immediately. This was on top of the billions it owed to its trading partners. It didn't have the money. The world's largest insurance company was bankrupt.

The dominoes fell over immediately. Lehman Brothers failed on the same day. Merrill was sold to Bank of America. The Fed stepped in and agreed to lend AIG $85 billion to facilitate an orderly sell off of its assets in exchange for essentially all the company's equity.

Most people never understood how AIG was the linchpin to the entire system. And there's one more secret yet to come out...

AIG's largest trading partner wasn't a nameless European bank. It was Goldman Sachs.

I'd wondered for years how Goldman avoided the kind of huge mortgage-related writedowns that plagued all the other investment banks. And now we know: Goldman hedged its exposure via credit default swaps with AIG. Sources inside Goldman say the company's exposure to AIG exceeded $20 billion, meaning the moment AIG was downgraded, Goldman had to begin marking down the value of its assets. And the moment AIG went bankrupt, Goldman lost $20 billion. Goldman immediately sought out Warren Buffett to raise $5 billion of additional capital, which also helped it raise another $5 billion via a public offering.

The collapse of the credit default swap market also meant the investment banks – all of them – had no way to borrow money, because no one would insure their obligations.

To fund their daily operations, they've become totally reliant on the Federal Reserve, which has allowed them to formally become commercial banks. To date, banks, insurance firms, and investment banks have borrowed $348 billion from the Federal Reserve – nearly all of this lending took place following AIG's failure. Things are so bad at the investment banks, the Fed had to change the rules to allow Merrill, Morgan Stanley, and Goldman the ability to use equities as collateral for these loans, an unprecedented step.

The mainstream press hasn't reported this either: A provision in the $700 billion bailout bill permits the Fed to pay interest on the collateral it's holding, which is simply a way to funnel taxpayer dollars directly into the investment banks.

Why do you need to know all of these details? First, you must understand that without the government's actions, the collapse of AIG could have caused every major bank in the world to fail.

Second, without the credit default swap market, there's no way banks can report the true state of their assets – they'd all be in default of Basel II. That's why the government will push through a measure that requires the suspension of mark-to-market accounting. Essentially, banks will be allowed to pretend they have far higher-quality loans than they actually do. AIG can't cover for them anymore.

And third, and most importantly, without the huge fraud perpetrated by AIG, the mortgage bubble could have never grown as large as it did. Yes, other factors contributed, like the role of Fannie and Freddie in particular. But the key to enabling the huge global growth in credit during the last decade can be tied directly to AIG's sale of credit default swaps without collateral. That was the barn door. And it was left open for nearly a decade.

There's no way to replace this massive credit-building machine, which makes me very skeptical of the government's bailout plan. Quite simply, we can't replace the credit that existed in the world before September 15 because it didn't deserve to be there in the first place. While the government can, and certainly will, paper over the gaping holes left by this enormous credit collapse, it can't actually replace the trust and credit that existed... because it was a fraud.

And that leads me to believe the coming economic contraction will be longer and deeper than most people understand.

You might find this strange... but this is great news for those who understand what's going on. Knowing why the economy is shrinking and knowing it's not going to rebound quickly gives you a huge advantage over most investors, who don't understand what's happening and can't plan to take advantage of it.

How can you take advantage? First, make sure you have at least 10% of your net worth in precious metals. I prefer gold bullion. World governments' gigantic liabilities will vastly decrease the value of paper currencies.

Second, I can tell you we're either at or approaching a moment of maximum pessimism in the markets. These kinds of panics give you the chance to buy world-class businesses incredibly cheaply. A few worth mentioning are ExxonMobil, Intel, and Microsoft. I have several stocks like these in the portfolio of my Investment Advisory.

Third, if you're comfortable short selling stocks (betting they'll fall in price), now is the time to be doing it... simply as a hedge against further declines.

Keep the fraud of AIG in mind when you form your investment plan for the coming years. By following these three strategies, you'll survive and prosper while most investors sit back and wonder what the hell is going on.

From:

Contrarian Investment Newsletter, Investing Advice, Investment Ideas

I don't disagree with much of this. What is important is that AIG's (nationalised) liabilities remain and continue to grow. The $700BN is peanuts compared to the real cost. America can't afford it and that is why the worldwide banking system will fail.

Originally Posted by bkkandrew

Yes - you said the link didn't work, which it did - it pointed post 669, which was addressing my post 668, which I stated here:

https://teakdoor.com/us-domestic-issu...tml#post785870

But when you quoted this post here:

https://teakdoor.com/us-domestic-issu...tml#post786651

You deleted the post numbers, only to claim here:

https://teakdoor.com/us-domestic-issu...tml#post786806

That you didn't know the post numbers!

Attention-span failure again DrA?

you really take the biscuit Andrew, the soggy one

I did not say the link did not work, I said it was not relevant. If you had posted the correct link then you would not be wetting your pants

I did not delete any post numbers, and I have shown that

oh, this comment of yours is worth remembering

The $700BN is peanuts compared to the real cost. America can't afford it and that is why the worldwide banking system will fail.

you can say, many years in the future, that you said it in October

unless of course it doesn't happen, then you can conveniently forget it

Originally Posted by DrAndy

The $700BN is peanuts compared to the real cost. America can't afford it and that is why the worldwide banking system will fail.

you can say, many years in the future, that you said it in October

unless of course it doesn't happen, then you can conveniently forget it

That, indeed, is one of the great things about forums (as opposed to the spoken word) is the perminent recording of opinions. I am happy you have bookmarked that statement for future use. The funny thing is that there has been a process of 'catch-up' for some time on this. I make a seemingly rash prediction, scorned by many with comments such as 'that can't happen', the 'Government wont let that happen' and 'they are too strong to fail' and you know what, comments are made after the event coming to pass such as 'well it was always on the cards' and 'I saw this coming'.

Analysis is about identifying the future implications of today's events and what, in turn, those implication may bring about. Unfortunately the world's leaders nowadays seem unable to do this and surround themselves with people that are similarly incapable. Worries about how today's actions look has taken over from what effect they may have.

Iceland has a population of just 300,000 and a gross domestic product in 2007 of around $20 billion -- less now that the currency has fallen so sharply. Its major banks have foreign-currency liabilities totalling $120 billion.


From:

Iceland Markets Hit by Bank Bailout Fears - WSJ.com

Iceland has nationalised one bank already, but interestingly, given its small GDP, it realistically cannot nationalise all of its banks, when one thing is certain - they are all insolvent.

Thinking things through logically, it is probable that Iceland will be the first Soverign defaulter. Nordic countries are already supporting the Krona, but have enough on their plate to do this ad infinitum. Iceland's default could be the catalyst for other defaults, ultimately the US default.

Originally Posted by bkkandrew

Analysis is about identifying the future implications of today's events

don't confuse analysis with speculation, in your case, with story making

It seems the construction of Liverpool Fc's new stadium is on hold, reasons cited are the credit crunch. The club is American owned. link

Originally Posted by Butterfly

Originally Posted by bkkandrew

Analysis is about identifying the future implications of today's events

don't confuse analysis with speculation, in your case, with story making

And its so funny how the stories always turn out to be true. Some lead, others follow. That's life.

HEART ATTACKS & BANK HOLIDAYS

The banking system breakdown is very far along, but still early. Remember USFed Chairman Bernanke stated over a year ago that the mortgage problem was contained. Try not to laugh. The bond crisis is absolute, broad, deep, and all-inclusive, enough to kill the USTreasurys after it kills the US banking system. The heart attack signals are with the LIBOR spreads over USTreasurys, the money market, the TED spread (Treasury versus EuroDollar), and short-term USTreasurys. Charts resemble heart attacks and EKG electro-cardiogram monitors. Many details appear in the October Hat Trick Letter report just posted. The bank runs have begun in earnest. Nevermind the big banks for a moment. The smaller ones are entering seizures. The small and medium sized cities are also entering seizures. Here are two stories, one about a city and another about the bank holiday coming.

This from a friend in Seattle: “I was talking to my neighbor last night. He is in finance in the county government, King County (Seattle). He said there are some very secretive budget talks being held, very hush, hush. Apparently, the county has lost around $200 million of taxpayer money in toxic paper investments , with huge implications on the budget. He says he is not privy to the details, but he is taking a 10-day vacation starting today, because he has nothing to do since everything is in flux.”

This from a friend in Atlanta with strong banking connections: “ Reliable word that Bank of America branch managers just received a letter or memo from the USFed instructing them to perhaps be ready for a one-week universal shut-down of the banking system , including access to checking accounts, savings accounts and credit cards. Reliable word has it that BofA bank branches received a shipment of signs last week, reading “WE'RE SORRY, BUT DUE TO CIRCUMSTANCES BEYOND OUR CONTROL, WE CANNOT BE OPEN AT THIS TIME.”

So the banks are in need of a respite, a break, a holiday. They need to shore up their positions. Economists and bankers avoid revealing the consequences of extended absence of short-term credit supply. Imagine all the supply chain DELIVERY routes being interrupted for lack of short-term credit, certain to interrupt the supply of food, gasoline, building materials, basic household wares, simple hardware, and more. The short-term credit would certainly also disrupt payroll streams for companies, inventory supply for retail chains, durable goods purchases by consumers (like washing machines & refrigerators), the maintenance of basic machinery (like cars, trucks, computer, communications), even cash dispensed at ATMachines.

Continued here:

Bailout Fixes Nothing, Banking System Collapse Approaches Climax :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website

Also posted here:

https://teakdoor.com/us-domestic-issu...tml#post788405

My thoughts of today.

Today's Events (Thus Far)

Germany flip-flops between guaranteeing savers' deposits, causing the Danish to follow the Irish and Greeks in a 100% 'guarantee'. Sweden increases its guarantee limit. Iceland shotgun weds the countries two biggest banks (making two big problems into one even bigger one) and orders repatriation of all capital.

World stock markets didn't like it. Japan down just under 5%, Indonesia 10%, Russia suspended after a 16% fall, FTSE down 6% and DOW futures threaten to break the all-important 10000 barrier.

There is a two horse race IMO for the trigger to bring down the entire system.

Scenario 1

Iceland nationalises the entire banking sector, but no-one believes they can support the commitments of their banks. Full-on default, both sovereign and banking. Knock-on effect cascades through European system, then on to US, bringing down most banks on the way. Initial symptoms will be ATMs not accepting many different cards, refusal of credit cards as the chains of settlement are broken.

Timescale of this scenario - this coming weekend and the start of the following week.

Scenario 2

Germany changes mind for a third time and issues blanket guarantee. The flight of capital to Irish banks (including, bizarrely, Ulster Bank, which is part of RBS) since their 100% guarantee is reversed, causing collapse of Allied Irish Bank and Bank of Ireland. The knock-on effect and symptoms of this will be the same as in scenario 1.

Timescale uncertain, as this is down to Mrs Merkel.

2 minutes after I posted the above, AFP reports that the Icelandic Stock Exchange has suspended trading in all financial stocks indefinately.

Looks like the Icelandic lot are winning this race of doom!