I'm going to post Karls blog tonight b/c I think it is very important:
http://market-ticker.denninger.net/
Basically, the worst case scenario may occur...a bond market dislocation. The real depression occurred after that happened.
Tuesday, October 14. 2008
Posted by
Karl Denninger at
21:17
(Page 1 of 279, totaling 558 entries)
» next page
Now What Hank?
The short graphical depiction of the success of Hank and Ben's latest rescue, if you don't have time to read
The Ticker today (Hattip to "Soros" on the forum for this find)
So you stole $250 billion that you allegedly were going to buy mortgages with (we knew that was a scam up front, as I said, but heh, you had to keep up the appearances until the ink was dry right?) and blew it on preferred stock in the banks - directly.
Sounds kinda Swedish.
Except its not, because the Swedes, when they had this same sort of problem with their banks, did two things you didn't:
- Forced shareholders to take all loss before taxpayer money was used.
- Forced full, complete balance sheet transparency.
The second is the critical item and the one that
you and Bernanke have continually refused to address.
Yet this is the root of the problem with trust, when you get down to it.
Nobody trusts the banks to lend to them because they have been shown repeatedly, over the last year, to be lying about their exposures and the state of their balance sheets, to the point of their CEOs showing up on national television days before they filed bankruptcy (as in the case of Bear Stearns)!
You have repeatedly thrown tens or even hundreds of billions of dollars at these institutions and it has, in each and every instance, disappeared into a black hole.
This will continue to happen until the truth is disclosed.
At best you've gotten a transient improvement in the credit markets but as the liars have continued to be exposed, and the prosecutions haven't begun, the market has come to discount
everything you say to zero and now your "saves" don't even get a full day's worth of market reaction before spreads start to blow out and the stock market once again tanks!
We the people are
not stupid Ben and Hank. You can only lie to people, both here in America and elsewhere, for a certain amount of time before your credibility is destroyed - from that point forward people demand
proof before believing anything that might come out of your mouth.
You and Ben (not to mention George Bush) crossed that Rubicon months ago.
We know, for example, that Ben threw $630
billion dollars into the system on the very day you (Hank) were claiming martial law would be imposed in America if you didn't get "your" bill, and yet the credit markets
did not unlock.
You got your $700 billion bill, but
the credit markets did not unlock.
A month earlier, you did the same thing with Fannie and Freddie to the tune of $300 billion,
and the credit markets did not unlock.
Today you made your announcement and
every bank in the world knew that these institutions in the United States were guaranteed with the full faith and credit of the United States, yet the credit markets still did not unlock!
How much
more can you guarantee beyond the full faith and credit of The United States?
Answer: There is no further guarantee you can extend beyond the sovereign credit of The United States.
You have used the last shell in the gun, and the credit monster singularity is still sucking up all the money.
If this doesn't work
this nation's economy is finished, and it
won't work because the root cause of this problem isn't too little liquidity -
its that too much liquidity has been provided for too long to cover up insolvencies. This has allowed rampant lying and fraud to become so prevalent that everyone is both doing it and believes everyone else is engaged in it too!
As a result they trust
nobody because they are dirty and presume (accurately so, it seems) that everyone else is concealing the same sort of trash they're hiding.
Ben, Hank, Congress - there is
exactly one way to stop this.
You must force full and complete balance sheet transparency for every firm on Wall Street.
Period.
No mark to model, no Level 3, no SIVs, no concealment of any kind.
You have put in place the most mighty of guarantees of both solvency and liquidity that you possess - the full faith and credit of The United States, in conjunction with the full faith and credit of other G7 nations.
It did not unlock the markets.
Congress: You have listened to Ben and Hank repeatedly sing the same song, and each and every time they do so, you have given them what they demand and what they claim will solve the problem.
In each case the prescribed medicine has been laughed at by the cancer in the financial system, as it has sucked up every dime you have provided.
If this disastrous course of action is not altered we will find ourselves with an unfundable budget deficit and a Bond Market dislocation.
This will result in an economic depression, just as it did in the 1930s.
You may be getting to the dislocation by a different path than they did in the 1930s, but we are headed for both the same event and an identical result!
I repeat for you this chart from previous
Tickers
See the end of that "Quality Flight" ramp job? That's where we are - just going over the edge.
2 year swap spreads widened today, the TED spread is still at historic highs, and worse,
Fannie and Freddie's spreads blew out to record wides.
Huh?
Well why would you own agencies if you can have a full faith and credit guarantee on bank debt that has a higher coupon?
You wouldn't, which means that we now get....
So much for helping the housing industry. You didn't say you needed a mortgage by chance, did you?
Do not believe for a second that a single thing done by these folks is going to help Main Street - or you. It will not, just as it has not. Oil and food price ramps, mortgage spreads, the stock market and the economy after jawboning repeatedly with "the economy is fundamentally strong" (instead of warning people that we were headed into a recession and might want to prepare for that!) and more.
"Main Street" will continue to get the most unpleasant of surprises if the course of action in Washington, most particularly the actions undertaken by The Fed and Treasury, is not reversed
now.
How bad can it get?
Read this article from Bloomberg:
"Oct. 14 (Bloomberg) -- Iceland's benchmark stock index plunged 77 percent, the
biggest decline on record, as trading resumed after a three-day suspension and the nationalization of the country's largest banks."
Think it can't happen here? The price of every imported good tripling overnight as the currency crashes by 2/3rds instantly?
That is what happened to Iceland - literally overnight.
If we don't force transparency of all financial institution balance sheet and capital positions, this may be coming to a stock market - and grocery market - near you.
Hope and pray it does not, and vote all politicians who voted for this crazy bailout bill out of office come November 4th.
I love this nation Ben and Hank - are you willing to kill it so your banker buddies don't have to confess?
GL to both of you. Hope you get it, will make mine closer!!
and I really hope this time you are wrong and we fly right past 1100. S-T-O-P that is greed once again !!! LoL ...I don't know how many read your warnings last month of sell....You were 100% Correct !!
