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Growing expectations that Lehman will become Wall Street's most high profile bankruptcy since junk bond specialist Drexel Burnham Lambert collapsed in 1990 sparked a sell-off in U.S. asset prices.

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Posts: 3617 | Registered: Dec 2001  |  IP: Logged | 

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... there have been surprisingly few people, even on the left, as far as I can see, and even in Asia, who have pointed out another seeming contradiction.

When other countries find themselves in a debt crisis, as happened across Asia a decade ago, America and world institutions like the International Monetary Fund argued strongly for free market, monetarist solutions: take the pain, cut subsidies, stop bail-outs.

When America (and the West more generally) finds itself unable to pay its debts, on the other hand, the pain must be alleviated by government action - even up to the point of nationalisation of giants like Freddie Mac and Fannie Mae and the giantly ambitious Northern Rock.

Why is the anti-globalisation left not up in arms about this double standard?
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And there is little doubt that Chinese government intervention played a part in this: it kept the yuan low against the dollar, rather than allowing it to float - thus keeping those imports cheap. It dealt with the huge consequent trade surpluses by buying US currency, using its dollars to invest in bonds. Buying bonds is another way of saying lending money, which is to say that the Chinese irresponsibly injected huge quantities of unnaturally cheap credit into the whole bloated system.

So in this case why is the anti-China, pro-free market right not up in arms about that? (I add in "pro-free market" because there is also the anti-China left, but they are not so pro-free market).
Well, here are some answers.

The anti-China, pro-free market right is largely an American phenomenon, and naturally enough will in this year's presidential election vote largely Republican. And the curious fact is that it is a Republican administration that has overseen the extraordinary interlinking of American free market capitalism with Chinese communism - or state capitalism, as some prefer to call it.

Among the biggest buyers of bonds in Freddie Mac and Fannie Mae is the Chinese government, via the People's Bank of China. In other words, the American financial establishment arranged for millions of ordinary Americans unknowingly to take out their mortgages with the Chicoms, as the neoconservative bloggers love to call the folks in Beijing.

And that is just the symbolic icing of the cake of the close relationship between the two economies.

Does the anti-China right want too much stress to be laid on the fact that Mr Paulson, a standard-bearer now for both the administration and Wall Street, was helping his friends in the Chinese government just as much as he was American home-owners when he nationalised FM and FM? No, I thought not.

What about the anti-globalisation left? Unfortunately, the unwinding of first the Asian credit crisis and then the Western credit crunch has revealed much that does not quite fit their picture of social justice as applied to developing and developed industrial states.

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I do not want to suggest myself, by the way, that along with lip-synching schoolgirls, Tibet crackdowns etc we have to start rounding on the Chinese as being "to blame" for the credit crunch. In these great interlocking patterns of globalisation, policy-makers all over the world get into ruts where collisions are impossible to avoid and in the absence of marked roads it is hard to say one driver is more responsible than the other.
...

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Posts: 7593 | Registered: Sep 2006  |  IP: Logged | 

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Originally posted by Lyrhawn:
My mom said she had to stop doing quotes (which is a sort of offer estimate for annuities) with AIG today, after spending half the day redoing them, because they are in some sort of trouble.

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Posts: 3617 | Registered: Dec 2001  |  IP: Logged | 

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Originally posted by rivka:
Am I at risk of having said accounts frozen if the FDIC is forced to take over? If so, probably for how long?

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Posts: 21898 | Registered: Nov 2004  |  IP: Logged | 

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At 1515 GMT, AIG was down 22 percent at 3.71 dollars, taking its worth down to 10 billion dollars.

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News reports said AIG was is crisis talks at the New York Federal Reserve, seeking a short-term loan of as much as 75 billion dollars to avert a cash crunch and bankruptcy.

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Posts: 2283 | Registered: Dec 2003  |  IP: Logged | 

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and for anyone not approaching retirement they wouldn't have had access to their money until things recovered, anyways.

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Posts: 10177 | Registered: Apr 2001  |  IP: Logged | 

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Originally posted by fugu13:
... those accounts would have been shifted into low-risk investments for anyone approaching retirement...

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Honest question (and you have to use short words with me ): before last week, wouldn't Merrill Lynch, AIG, et al, all have been considered low risk investments?

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Edited to add: I think I don't understand the timing context of your answer; i.e., is it "would [already] have been shifted into low-risk investments" or "would have been shifted into low-risk investments [in response to recent changes]?"

Thanks so much.

Posts: 14017 | Registered: May 2000  |  IP: Logged | 

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He thought the near brush with catastrophe would bring about an acceleration of efforts within the Treasury and the Fed to put safety controls on the use of credit default swaps.

“They’re going to tighten the screws and say, ‘We want some safeguards on this market,’ ” he said of the Fed and the Treasury.

The swaps are not securities and are not regulated by the Securities and Exchange Commission. And while they perform the same function as an insurance policy, they are not insurance in the conventional sense, so insurance regulators do not monitor them either.

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Posts: 2283 | Registered: Dec 2003  |  IP: Logged | 

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Originally posted by fugu13:
KoM's description is a decent approximation.

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Also very funny.

Posts: 32919 | Registered: Mar 2003  |  IP: Logged | 

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Rabbit said stocks were also under seasonal pressures, with September typically the worst month of the year for the major gauges.

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Of course I thought of our Rabbit first...

http://money.cnn.com/2008/09/17/markets/markets_newyork/index.htm?cnn=yes

Posts: 11265 | Registered: Mar 2002  |  IP: Logged |