Wednesday, August 29, 2007

The Bust that just Keeps on Busting

Well, the real estate bust and its Siamese twin credit crunch keep on rolling and are now a global phenomenon. The Bernanke Bunch blew the call and had to cut the discount rate in a desperate effort to stave off panic, or as the press release put it, "to promote the restoration of orderly conditions in financial markets...." Sorry, folks, it won't work. All the market fundamentals say that more is needed, a lot more. By the time FOMC meets on 18 September, anything it does with the federal funds rate will be too little too late. Expect more volatility in the securities markets as they attempt to come up with rational pricing for mortgage-backed securities (Good luck with that, lads.), and just accept that the Good Ship Easy Credit has hit the ice berg of reality and is slowly rolling over and sliding under.

And if anyone had any doubts that the children over at Stratfor do not generate intelligence worthy of the price or even the label, all you need do is look at George Friedman's Geopolitical Report for 13 August. He concludes that the subprime crisis is not geopolitical. We'll see if he keeps saying that when the US has to beg Japan not to do anything that would unwind the Yen carry trade and also beg China for more credit, and both of them call in some serious political markers in return. This situation is going to get a bad case of the aggravated uglies.


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