OT for Royal Dragon

[MightyB]

Check this out: http://zerohedge.blogspot.com/2009/02/how-world-almost-came-to-end-at-2pm-on.html

On Thursday (Sept 18), at 11am the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn't be further panic out there.

If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.

Watch the cspan video too.

[Water Dragon]

Just a quick point. The insurance on money markets didn't happen until October, and covered only monies in money markets as of 09-19-2008.

Also, money markets are generally not bank products although many are based on short term bank debt.

A run on banks would have been covered by existing FDIC insurance although they did raise the insurance to $ 250K from $ 100K on non-qualified accounts.

I dunno why this is being posted, but the facts are not correct. I was there on Sept 18 watching CNN and trying to calm down clients. There never was a fear of the economy collapsing (at least at that point). They fear was that money markets would break the buck, or drop below a dollar a share. In one case, a money market did temporarily drop to $ .97/share, but recovered quickly.

Money Markets are based off short term lending between banks called repos, and commercial paper to businesses. The fear when money markets dry up is that credit will tighten and short term lending will decline. This is basically what did happen with money markets and we are still seeing the effect of that.

I just like making sure people use the Correct when they argue :D

[MightyB]

Rep Paul Kanjorski talking about on Cspan? Sounds like he knows what he's saying and it sounds like there almost was a collapse. Watch starting at 2:20 in.

http://www.youtube.com/watch?v=pD8viQ_DhS4&eurl=http://zerohedge.blogspot.com/2009/02/how-world-almost-came-to-end-at-2pm-on.html

[Mas Judt]

Thank you WD - I was having a hard time putting it into words.

Some effed up sh!t out there, but it is only useful to know if you know the correct.

[RD'S Alias - 1A]

I saw this. I am not really sure what to make of it. I am a Futures/Commodity guy mostly. This is a bit out of my area.

[Water Dragon]

Rep Paul Kanjorski talking about on Cspan? Sounds like he knows what he's saying and it sounds like there almost was a collapse. Watch starting at 2:20 in.

http://www.youtube.com/watch?v=pD8viQ_DhS4&eurl=http://zerohedge.blogspot.com/2009/02/how-world-almost-came-to-end-at-2pm-on.html

OK, I just had a chance to listen to this. First, Rep. Kanjorski admits in the beginning he is not an expert. This becomes pretty evident around minute 2:20. There was a situation with money markets and a situation in the banking system, but they were two seperate things. Rep Kanjorski is condfusing them. We never had a run on banks, we had a run on money markets. FDIC was raised to $ 250K partly to prevent a possible future bank run and partly due to the fact that $ 100K was worth a whole lot more back in the 1930's when the limits were established.

Take a look at the article I posted below. It does a good job of explaining what really happened in September '08, and what economists really meant when they said 'economic collapse'. It's a scary thing, but it's not what you and Rep. Kanjorski are thinking of. If you have any questions, I'll do my best to answer them for you.

http://en.wikipedia.org/wiki/Money_market_funds

[Water Dragon]

I saw this. I am not really sure what to make of it. I am a Futures/Commodity guy mostly. This is a bit out of my area.

Imagine what would happen if, when the contracts are finally delivered, (when the actual product is received), no one had the money to pay for them.

[RD'S Alias - 1A]

THAT I understand!!

It would all come grinding to a halt and everyone would have all thier assets seized or be put in jail.

[Water Dragon]

Right, and do most people cover their contracts with cash? No, they generally use short term loans from banks. If there are no short term loans from banks the downward spiral begins.

That's what all the Hoo-Hawing is about right there.

[Mas Judt]

Wow, it's a good thing we have Barney Frank and Chris Dodd in charge to fix this! After all, the bribes (er campaign contributions) they received to prevent oversight should in no way shake our confidence in their ability to 'fix' this problem.

And it's double-plus good that Nancy Pelosi is ignoring her promise to give everyone 48 hours to read the 'stimulus' bill. I mean, we wouldn't want anybody to actually KNOW what she is shoving down our throats, do we? Besides, she has a vacation to get to...

[Water Dragon]

Don't get me started on Congress, Joe. I'm upset with both sides right now.

On one hand, you have the Democrats, who think that because there is now a Democrat in the White House, they get to use a stimulus bill to fund pet projects. Money that could be used to keep schools running, unemployment benefits available, and proivde much needed jobs for the construction industry is being delegated towards a bunch of crap that wont do one thing for the economy.

The Republicans are even worse. They're sitting back, refusing to get involved with the process, and then blaming the Dems. They're sabotaging the thing so they can blame the Dems and make a power move in 2010.

Also, look at the 'tax cuts' they promised. There are no tax cuts that will inject money in the economy in 2009, just a bunch of tax credits that will have an effect, but not until 2010 when people can actually claim them and get the money.

And then you have these idiots blaming Obama, when he hasn't even come into play yet. He will, when the bill hits his desk, and he may screw it up as well, but that hasn't happened yet.

With the left saying Obama is too conservative, and the right saying he is too liberal, he's starting to look more like a Centrist President than anything else, which is where I think he should be. Hopefully, he doesn't disappoint me when the Stimulus finally ends up in his court.