Friday, October 09, 2009

Too Big to Fail/Not


Gaming the Market comes through again. Check out this little gem about liquidity and what it means about the economy. Chilling to say the least but then again, on April 15, 1912, the Titanic was believed to be unsinkable but wasn't.

We are on the cusp of another critical seizure in capital flow. An event that might sink the ship. If one of the major banks, or someone like Greece (who is on the verge of bankruptcy), becomes insolvent we’ll see a domino effect of collapses. There was a digital run on the banks last September which nearly froze the credit system. Liquidity is so tight now another run has even greater probability of breaking the system. There is more and more debt chasing fewer and fewer real dollars. Current policy makers believe there is no ceiling to short-term debt creation, baring a collapse. Their formulas tell them the Fed can print money indefinitely, because the Fed is ultimately capitalized. Others are convinced we will learn what the ceiling is before this decade is out.

The Titanic sinking took 2h:40m. The well informed passengers didn’t know for over an hour. Half the critical period was spent in denial. Our financial ship is crippled, but still making power. We all know it has been fundamentally damaged. What we don’t know is the crew jumped ship with the best life boats. Meanwhile we’re up on deck listening to the music play. This is beyond criminal. And most of the unfortunates are stuck down in steerage with no way out. History shows the ship was doomed to sink no matter what was done. If not that year, then another. The lesson learned was how to save the people. Maybe this info will help you save someone."


"It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject of inquiry which can on no account be neglected." - Sun Tzu, The Art of War
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