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View Full Version : is lending really "seized up"?? Is that the cause of the "crisis"?



grapejelly
10-10-08, 09:15 AM
ContraryInvestor.com had a good chart and comment. I won't post it because it is in their private members section. But it cast major doubt that lenders have "seized up."



It showed lending *growth* has fallen but lending is still going on. Bigtime.


Now that chart may be true up until a few weeks ago and maybe lending just dived off a cliff.


But there are several premises that are taken as gospel in this "crisis"


1. Lenders won't lend to each other cuz they don't know if the other lender is solvent.


2. "Injecting liquidity" must be done. That will "restore confidence".


3. What the hell does that mean? Are the banks patients who need an injection of liquidity so their blood doesn't dry up? As the solution is tried, it doesn't work, it makes the problem worse. So they go back and try it again, double this time,


4. And that makes thing worse.


There is an all too typical story below on Bloomberg right now.


"Libor for Three-Month Dollars Rises as Cash Injections Misfire"




http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a4r3HnlEV2jo





``Central banks are trying to supply liquidity, and in many cases it just comes back to them,'' said Robin Marshall (http://search.bloomberg.com/search?q=Robin+Marshall&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), director of international fixed income in London at NCL Smith & Williamson, which oversees about $20 billion in assets. ``There's a real problem in getting people to put their money to work. The fear of counterparty risk is so intense that the only bank prepared to lend at the moment is the central bank.''



Seized Up


Lending between financial institutions has seized up since the collapse of Lehman Brothers Holdings Inc. (http://www.bloomberg.com/apps/quote?ticker=LEH%3AUS) on Sept. 15, stymieing attempts by governments and central banks to stave off a global recession. The Bank of Japan added 3 trillion yen ($30.3 billion) to the banking system and the Reserve Bank of Australia pumped in A$2.63 billion ($1.8 billion). The European Central Bank today loaned banks $94 billion for four days.



The MSCI World Index (http://www.bloomberg.com/apps/quote?ticker=MXWO%3AIND) lost 3.6 percent today, extending this week's drop to 19 percent, the most since at least 1970. Gold rose to a 10-week high in London as investors sought a haven for their cash. The Libor-OIS spread (http://www.bloomberg.com/apps/quote?ticker=US0003M%3AIND), a gauge of cash scarcity, climbed to a record 366 basis points.


``You just don't know whether the person you're lending to is going to be the guy that has the weak balance sheet and is going to fall over,'' said Sally Auld (http://search.bloomberg.com/search?q=Sally+Auld&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), an interest-rate strategist at JPMorgan Securities Australia Ltd. in Sydney. ``What markets are telling you is that it doesn't matter what central banks and governments do.''

mattley
10-10-08, 10:50 AM
Here's a link about trade seizing up. Goods stacked up on piers going nowhere because people can't get credit:

http://www.nakedcapitalism.com/2008/10/international-trade-seizing-up-due-to.html
(http://www.nakedcapitalism.com/2008/10/international-trade-seizing-up-due-to.html)
I thought about adding this to News, but I'll let a more long time poster bump it if worth while.

A guy in the comments says he works in shipping and this isn't that deviant and doesn't necessarily mean a no-food-on-shelves crisis.

I'm taking the morning off to go to the grocery store, just in case.

FRED
10-10-08, 11:32 AM
Here's a link about trade seizing up. Goods stacked up on piers going nowhere because people can't get credit:

http://www.nakedcapitalism.com/2008/10/international-trade-seizing-up-due-to.html
(http://www.nakedcapitalism.com/2008/10/international-trade-seizing-up-due-to.html)
I thought about adding this to News, but I'll let a more long time poster bump it if worth while.

A guy in the comments says he works in shipping and this isn't that deviant and doesn't necessarily mean a no-food-on-shelves crisis.

I'm taking the morning off to go to the grocery store, just in case.

The Auto Credit Crisis: It's Real (http://www.businessweek.com/lifestyle/content/oct2008/bw2008109_239160.htm?chan=autos_autos+--+lifestyle+subindex+page_top+stories)

AutoNation disputes the claim that there is no credit crisis. Dealers and consumers across the country are feeling it every day

While Ed Wallace claims in his Oct. 8 column that there is no auto credit crisis (http://www.businessweek.com/lifestyle/content/oct2008/bw2008107_076176.htm) (BusinessWeek.com, 10/7/08), I invite him to actually talk with any of the thousands of customers who couldn't secure adequate financing on a new vehicle purchase this past month.

I also invite him to ask me about how things look from the point of view of Mike Jackson (http://investing.businessweek.com/businessweek/research/stocks/people/person.asp?personId=186738&symbol=AN), chairman and CEO of America's largest automotive retailer, AutoNation (AN (http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?symbol=AN)). In fact I'm surprised that he hasn't, considering that he made a statement about Mr. Jackson and his thoughts on the credit crisis but never even called the company to get his point of view on what they had been saying. In fact, Mike Jackson is one of the most accessible CEOs in America who visits with customers and associates at every chance. more... (http://www.businessweek.com/lifestyle/content/oct2008/bw2008109_239160.htm?chan=autos_autos+--+lifestyle+subindex+page_top+stories)
The Fed's still trying:


http://www.itulip.com/images/nonborrowedvsborrowedoct102008.gif

leonel80
10-26-08, 11:28 AM
I think that we the global economy is in crisis, every sector will be in crisis that is housing, car, commodity, currency, everything will be affected in this global economy.

phirang
10-26-08, 11:43 AM
I think that we the global economy is in crisis, every sector will be in crisis that is housing, car, commodity, currency, everything will be affected in this global economy.

WOW! Really? What insight!

don
10-26-08, 11:44 AM
Last night on the local San Francisco news, they reported 100 car dealerships in California had closed so far this year. An amazing number.