Monday, October 06, 2008

Dooomed !

Reminded me a little of Black Wednesday, this afternoon. It tends to put you off your work when the FT index is heading southwards like Captain Scott and you're wondering which bank will still be there this time next year - and will it include yours ?

An 8% hit on the FT is a lot for one day ... but the Fannie Mae CDS auction doesn't seem to have been too bad. Maybe it'll all bounce back tomorrow. Around 4 pm I was thinking about buying a rotovator, digging a cellar and getting a shotgun license. Have prices of fortified compounds in Montana fallen ?

2 comments:

DJ said...

TFT! All day I've been thinking of that line from 'Gremlins 2':

"Right now we are advising all our clients to put everything they've got into canned food and shotguns."

wildgoose said...

I don't know where the BBC finds them all.

The Today programme has just subjected us to a steady diet of different people all of whom are demanding an immediate rate cut. No doubt they claim they are being impartial because there is a range of views of how much interest rates should be cut, up to and including one idiot who was demanding 300 basis points - 3% !

So let's get this straight.

We have a banking problem caused by interest rates that are too low. In these circumstances banks have to (and are encouraged to) make lots of loans in order to keep up their profits - in effect it is "sell them cheap so pile them high".

This creates a real estate asset bubble which combined with the dodgy loans means that their "assets" don't look too secure thereby undermining their capital reserve ratios.

So the banks need to rein back and rebuild their asset base.

They need higher interest rates - and LIBOR, the Inter-Bank interest rate, is much higher.

And so the BBC has a steady stream of people being interviewed all calling for lower rates.

Japan had interest rates at ZERO PER CENT and they were in recession for OVER A DECADE.

In other words, it didn't help.

And at the same time we have the example of Iceland, whose currency fell by 30% in a single day yesterday, to show exactly how dangerous it is if investors lose confidence in your currency.

And the BBC are interviewing people advocating a panic slashing of interest rates by 3%.

So why am I paying a license fee for these bozos to spread this garbage over the airwaves?