Does Anyone feel like Bailing

[tw]

Originally Posted by Bullitt

Professor of mine today mentioned today that we should watch to see what the hedge funds do tomorrow as a serious indicator of further trouble.

Economic disaster averted during the Long Term Capital Management fiasco may have scared commercial banks sufficiently to demand honest fiscal practices from the hedge funds. Bank of America, JP Morgan, and Citigroup were three suspected at risk if hedge funds default. These three currently appear to be the most stable.

Almost one year ago, riskiest equities were identified. Take a gander at eight pages of posts in Sub-prime Bail Out in the first week of November 2007. Listed as problems were companies even in the last (109th) post. What is ongoing today was an obvious and serious problem almost one year ago.

Or again in March 2008 Housing Crisis in Australia .

In Sept 2006, a "Family Income" chart demonstrated one symptom that predicted today's financial meltdown: Has the Bush Doctrine failed?

What is next likely to be harmed by credit market seizures? Hedge funds must be under pressure since the funds are unlikely to have hedged for losses this large and are very dependent on access to credit.

Crash of Wachovia and Washington Mutual occurred so quick without warning. Therefore others are probably as unstable. Furthermore, foreigners are not marching in mass numbers to buy up so many 'discounted' American firms. That implies equity markets must fall further.

Too much accounting has been in the tradition of Enron and Arthur Andersen. Anyone can only assume that other unstable WaMus and Wachovias are out there. Commerce Bank has also been on my suspect list. Major regional banks may next be in line for collapse.

How serious is the problem? If credit markets seize only because the government does not provide $700billion, then capital losses are probably even worse.

What happens next? World financial markets are suddenly surprised by how much America must buy from the world. Therefore America must sell debt at even higher costs to America. Where does the US government get $700billion? If none from Americans, then where? We have yet to see shock when America sells an additional $700billion debt onto world financial markets that will then demand even higher interest rates on a riskier American economy. After all, who wants to buy debt in dollars that will only fall in value?

Why the bailout? Because the only remaining American institution with sufficient credibility to borrow that much from foreigners is the US government.

Who kept saying, "The fundamentals of our economy are sound"? Even the spread sheets are now exposing how 'sound' this economy has been.