Rep. Paul Kanjorski of Pennsylvania, on C-Span in late January. (Partial transcript, beginning at about the 2:20 minute mark)
“It was about September 15th. Here’s the facts, and we don’t even talk about these things. On Thursday at about 11 o’clock in the morning, the Federal Reserve noticed a tremendous draw down of money market accounts in the United States, to the tune of $550 billion dollars – being drawn out in the matter of an hour or two.
The Treasury opened up its window to help, they pumped $105 billion into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account, so there wouldn’t be further panic out there. That’s what actually happened.
If they had not done that, their estimation was that by 2 o’clock that afternoon, $5 trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours, the world economy would have collapsed.”
It would have been the end of our economic system and our political system as we know it.
Some out there seem to believe this is newly disclosed information. It’s not. Nor is the rapid movement of money necessarily evidence of a plot.
More here from a UK perspective.
If all of this goes to rat$hit we may look back at geithner’s screw-up yesterday as the point in time when market confidence in the competence of the fed really went into an irreversable tailspin.
It was panic … digital panic. Once bank stocks or money markets fell to a certain point that day, tens of thousands of computers the world over triggered defensive sells of stock (stop loss), which drove bank stocks/money markets even lower, triggering even more stop loss orders. As well, if shorting was still allowed, shorts, especially naked shorts, accelerated the run if it included stocks. Then there were the millions of investors, from millionaires to mom and pop, who’d been watching with fear every move their portfolios took … and once the run began they were either dumping stocks themselves on “Ameritrade”, or screaming on the phone to brokers or hedge fund managers to liquidate their investments. Between the digital panic, and human panic, and short selling (if any), the perfect storm was launched. Hundreds of hedge funds (344) were liquidated in 08 … that means trillions of dollars pulled out of the market in stocks, futures, etc.
It could all have been started by a very large investor, say a Saudi, deciding to clear out of the financial sector or USD, triggering a broad run on banks and USD. Many large investors trade in ETFs, for example, which effect a broad swath of the sector they trade in, even money markets.
The difference now is, that all the terrified ninnies are gone … out of the market. They’ll be back, but not until complete confidence is restored … then they’ll flood into the market in an orgy of panic buying. But, until they come back, any recovery will only be a dead cat bounce.
The whole thing runs on greed … perfect beautiful capitalist greed. Without “the market” and the greed it feeds on, there would be no Western wealth; we’d all be Bangladesh.
It’s been a few years now that I am warning everyone: this is what is going to happen if the flow of money overseas in the form of salaries paid to the outsourced jobs continues.
Prior to outsourcing the Western workers received ‘large’ amounts and immediately spent half of them in the form of taxes. The other half was spent gradually over the next pay period, thus returning 100% into the Western economies.
Now that good chunk of our economy is gone to the countries like China, India, Brasil, Tailand, Indonesia, Malasia and a number of others, their workers receive 1/10th of the former salaries spending them all to pay their dictatorial regime’s taxes and buy a handful of rice to survive till tomorrow. Our economy is getting close to zilch.
After so many years of draining our economies for cash, who is going to continue to buy sh1t?
So it starts.
Welcome to the third world.
Completely disagree with aaron. Getting the rest of the world involved in capitalism and global trade is why we have prospered as much as we have in the last 30 or so years.
What has gotten us into this mess primarily is government providing easy credit to people who cannot pay for it by guaranteeing the loans – fannie and freddie et al. and then compounding this folly with a series of ill-concieved attempts at solutions and a lot of over-regulation (eg – Sarbanes oxley)
In fact a large part of our salvation from this morass will likely lie with the lower middle-class consumers of india and china who number in the hundreds of millions.
The blame rests with “western” governments. When fiat money was introduced, governments were no longer constrained by gold convertibility. Every mistake and every stupid promise could be covered by printing money.
Once confidence is lost in fiat money, there is no saving the system. Our standard of living is about to drop precipitously. It’s only a matter of time.
For a much more in-depth analysis, check out this site:
http://market-ticker.denninger.net/archives/2009/02/10.html
For a serious discussion on this check “RunToGold.” Trace Mayer has the best discussion on the collapse of the dollar I have found anywhere.
Sitting back reading all this stuff about the decline in world economonies,and how stimulus plans will/won’t help,and cut/don’t cut taxes,etc.,I have come to one inescable ABSOLUTE TRUTH…..If “the cure” comes from any politician or economists mouth…it is PURE,UNADULTERATED BULL CRAP!
How come nobody in the MSM thinks a $550 billion dollar US bank run is news? How come nobody in the MSM thinks England coming to within 3 hours of total insolvency is news?
Why is it that I don’t get to hear about this stuff, all I get is the weather, sports scores and the fire in Tanawanda, film at 11?
I don’t know Phantom.
Some woman just had octuplets; another woman of 60 years of age had twins.
Jen and Angie are still at each other’s throats over Brad.
You just don’t have a handle on what is really important.
I just read on Chris Martenson that the $550B was a huge overstatement, and the number was somewhere closer to $50B. Still a crap load of cash though.
[quote]It could all have been started by a very large investor, say a Saudi, deciding to clear out of the financial sector or USD, triggering a broad run on banks and USD. Many large investors trade in ETFs, for example, which effect a broad swath of the sector they trade in, even money markets.[/quote]
Paul,
How about an expert, of the Crack-head generation, with a BB & a computer program. The economists, from the same stable, that think they know something they don’t.
Its never as bad or as good as one thinks!
Phantom,
The film @ 11 “tags” you with that ancient CBC tease. Do you work @ CBC ?
the stock market is still dropping and treasury bonds are paying zero.
I know one thing for sure. Until I see a few thousand greed-heads marched off to prison(and I mean prison, not some country club)not one cent of my money goes into the stock market.
I would like to include my former “financial adviser” on that list…….if I would have listened to her, I would be out over 100 grand.
Parasites, all of them !
When did people start to believe that whenever the markets tank, somethings wrong?
If markets never tanked, how would we know what up is?
I guess it’s the same people that think climate change is an indicator of human wrongdoing.
Being in control means never having to say, I’m Soros.
Collapse of the US dollar?!
Once again, economic ignorance reigns supreme at SDA. The US dollar index ($USD) cratered to nearly 70 back in 2007; today, it’s up to 86. That’s a 20% rise in just over a year. Some freakin’ collapse.
Paul, Aaron, Rosco – come and see me for a quarter, so you can buy a clue.
Yes the conspiracy theorists have come out, none of the links highlight that though.
We were close to something ugly, we still arent far away but we arent on the cliff edge, or over it anymore.
MMF broke a dollar, something they ar enever supposed to do. This caused a number of rational reactions to an irrational situation. Individuals withdraw money to be in eiher cash or or other instruments to preserve capital, Mutual Funds and Banks hoard cash since they need to meet these redemptions and none of them want to be the ones to not deliver funds. Banks also hoard cash on the overnight because they dont know their needs and they dont know if the institutions they lend to, even overnight, will survive.
Remeber that cash on hand is a fraction of the deposits. At least 10 to 1 if not higher.
So 550 billion supported at least 5 trillion in deposits and investments! Simple banking….it was an electronic run…..it was avoided.
No conspiracy, but definitely a crisis. The information is slowly leaking out as people feel more comfortable talking about it. Discussions of martial lawmight have happened if you were talking about a scenario where there was a massive bank system failure.
Just to give you an example. If the system totally froze then all the payments that flow through overnight get frozen and dont settle…what are those things
1) Payroll
2) Credit Card Deposits
3) Bank card Deposits
So imagine what happens when your pay doesnt show up in your bank account, your credit cards and debit cards stop working and when you cannot get the cash you and everyone else wants out of the bank because they ran out of notes. Martial Law for sure.
Fortunately that didnt happen. No conspiracy, just the actions of millions of people in the herd. “men go crazy in congregations but only get better one by one.”
It is just one public firm’s founder/ceos’s take but is a very well researched expose on naked shorting for fun, profit and annihilation. Check out deepcapture.com. If it is one tenth true the soon to be vacant real estate in Manhatten needs to be converted to prisons.
For a similar perspective check out Al Martin.
ABSOLUTELY INCREDIBLE
the US $ is the world currency.
until that changes the US is still in control…….??????????
Members of the jury, – now pay attention here kevinb,- we need to wait until the evidence is all in before pronouncing. I suggest we adjourn for a year. By then we will know who needs to buy a clue.
Gresham’s law states that ‘bad money drives out good money’.
So the more ‘bad’ money the USA prints, the bigger the flight of wealth/money out of the USA to what or where investors consider ‘good’ or better value.
The object of the game for investors has quickly switched from primarily creating wealth to the preservation of wealth and property of what you presently have.
Grab a hoe, guys.
Isn’t this what George Souros did to the pound in the late 80’s?
Isn’t this what George Souros did to the pound in the late 80’s?
Isn’t this what George Souros did to the pound in the late 80’s?
Kanjorksi is a putz.
This was a panic brought on by Lehman’s collapse where money market funds wanted CASH.LEH was a huge force in the commercial paper market, and their bankruptcy froze CP trading and encouraged MM funds to raise cash out of fear and also to account for client reedemptions.It was a classic bank panic in the interbank markets.
The repo market shutdown, and MM funds didn’t want anyone’s paper but Uncle Sam’s.Hence, a run on cash.It wasn’t a conspiracy, but fear and panic.
Howie: Exactly! The panic was growing since summer of 07 and finally popped. Something, or someone started the run, and the rest followed. There is nothing complex about it.
By the way, I put recovery starting summer 09. Todays retail sales stats prove the point. By this summer inventories will be zilch and the price of oil has given the world the biggest tax cut anyone could imagine.
And, whoever thinks that stocks are still going down, doesn’t follow stocks. Most are up, with the TSX as a whole slowly gaining. The DOW and TSX are a limited measure; you’ve got to check things out sector by sector.
Only liberals pushing The Big O’s stimulus and those wanting handouts are screaming economic crash. The 200 economists who wrote the open letter in the NYT made it clear … the economy will mend itself; just manage the financial sector and the rest will be fine.
Lehman didn’t crash, it as taken out by naked shorts. Do you seriously believe Madoff is an exception? Did you see the Markopolis testimony?
There is no plausible explanation other than a criminal conspiracy to explain the global market today. That’s why no one has a solution.
Geopolitical ambition realized through massive fraud rather than war, mercantilism to the nth degree and thieves buying political favors to achieve shared goals with crooked pols.
Hey Rosco,
A year ago, I was regularly posting here that the US was in recession, and was just as regularly lambasted for it. Of course, time proved me correct, as I’m sure it will re: the US dollar.
Are you correct in sensing that the US dollar should fall, given the huge fiscal and trade deficits? I think so. However, the question is “Fall against what?”. Other fiat currencies? Not a chance – the Chinese are freaking out over the collapse of their export industries, so there’s no way they’re going to revalue the yuan. The dollar has already dived against the yen, falling from 110 to 90 in the last year, and the Japanese are also freaking out; they don’t want the yen to fall any further. The euro and the pound? No chance there either. Both the ECB and Bank of England are printing money as fast (or faster) than the Fed. And, although on the fundamentals, our C$ should be in much better shape, currency traders still think of it as a petrocurrency, and with oil hanging around $35, the loonie isn’t going anywhere soon.
And let’s not forget that the US is still the place where most people feel their money is “safe” (i.e. not subject to government confiscation). That alone keeps propping up the greenback.
The only place I see for real appreciation is gold. I’ve been long gold since 2002 (at $250/oz), and although we’ve had a severe correction over the last 18 months, the bull seems to be back in force. With the unprecedented “stimulus” President Bambam has planned, I wouldn’t be surprised to see gold hit $2,000/oz at some point. Of course, when and where remain to be seen.
Gord, you have to finally make an attempt at trying to understand why those people can’t pay their debts. Because they are no longer making that much money working for the US companies. The rest of your tirade is somewhat correct: involving the rest of the world in capitalism is good for them, they make a buck. But they don’t spend it here as WE used to do. The Chinese workers spend their yuan at home, and another 5 yuan go into construction of that Aegis battleship, drawings for which their intelligence stole from the yanks. All that instead of me spending 10 bucks and 10 bucks going into Ontario road construction, hospital building and subsidizing Bombardier.
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