Brendan and Malcolm have provided a nice little distraction, but it’s time to look at other world news: to wit, another US financial giant has hit the deck (two, if you count the takeover of Merrill Lynch as well as Lehman Brothers filing for Chapter 11). Is the rest of the world going to catch a cold from America sneezing, or will the strength of the BRIC economies keep the global economy relatively robust while only the US coughs its lungs out?
So many pollies and financial wonks with vested interests are telling us all not to panic (and that now is such a good time to place a buy order on the stock market now that everything’s heading for bargain prices, dontcha know) that the very uniformity is more than a little alarming. What insights do the eco-wonks have for the rest of us? Which pundits have the good oil and who are just mouthing platitudes? What the f*ck is going on?
One interesting question is who’s got cash sitting burning a hole in their pockets, and might possibly choose to buy some cheap assets along the way.
Sovereign wealth funds strike me (as a guess) as likely candidates. Watch the political gyrations if Chinese or Middle Eastern money gets involved in any bailouts…
Mind you Temasek Holdings has just lost a pile of money in their investment in Merrill Lynch, so that might kind of discourage any sovereign wealth fund who thinks they’re getting a bargain investing in the US financial sector at the moment…
This article by Michael West is a good place to start .Of the big 5 US investment banks only 2 remain – Merril has become an inhouse business of Bank of America.
Goldmans and Morgan Stanley are due to report this week.
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AIG is a giant insurer . It’s survival looks doubtful.
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As the couterparty exposure to these credit derivatives is largely still unknown it isn’t possible to know at this time just how big the dangers to the economy are. In the Michael West article he mentions one australian bank has a trillion dollars of exposure for example.
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http://business.smh.com.au/business/banks-wary-of-lehman-plague-20080916-4hgn.html?page=1
So many pollies and financial wonks with vested interests are telling us all not to panic
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That’s right don’t panic. Just get that oxygen mask and strap it on firmly. Make sure you do this before helping the children. Take deep breath. We’re just going to make an unscheduled water landing.
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No you commie that doesn’t mean we’re crashing into the fucking ocean. What’s this? It’s a parachute. Fuck off and get your own.
So many pollies and financial wonks with vested interests are telling us all not to panic
While the pollies obviously have more of a vested interest than most, surely almost every Australian has an interest in the markets not collapsing. I’m a penniless student with not particular affection for the current financial systems, but I wouldn’t particularly relish a financial meltdown – I have a vested interest in keeping my job, etc.
For a sense of history on financial crashes, I recommend Charles Kindleberger’s Manias, Panics and Crashes:
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The reality is that everyone is guessing and nobody really knows for sure; which is a bit scary. Needless to say though, the probability of the world sinking into another depression circa late-1920s is surely slowly creeping away from zero. The crisis may well blow over over the next few years, but if the damage suffered by the financial sector is catastrophic by then, it’s difficult to foresee just how far reaching the consequences will be.