Quote from makloda:
What about all (not just financial) companies that rely on short term financing via the commercial paper market (which came to a stand still)? Unemployment to 15% is one thing (bad enough, but we'd survive), LIBOR to 15% another (apocalypse).
Without a working commercial paper market you'd see tens of thousands of companies worldwide be unable to make payroll, pay suppliers, cancel orders etc.
1929 had treasury secretary Mellon propose "Let all the banks fail that need to fail, let's turn off the liquidity spigots, let's get speculation and excesses out of the system." Today we have Jim Rogers saying the same BS. Didn't he say doing the same thing and expecting different results is insanity?
This is not the Great Depression.
While the Crash was pre-mediated and induced (no conspiracy there!), the evaporation of post-29 credit was unnecessarily prolonged by the lack of expansionary reserve-ratio legislation. Everyone took their gold outta banks, credit was restrained, and the Guv did nothing for years!
Todays system is different. We can go to 0% whenever we like!
Ideally, we nullify CDS, withdraw support for Banks, they start going under, LIBOR goes to 15, and weak banks fail.
Why end their? Not all Banks are dependant on LIBOR to finance their day-to-day operations. Only Banks geared to the Tits (read: many, but not all!) need LIBOR to finance their leveraged positions.
Further, we've got the FED open window and PRIME rate is still retardedly low. Sound banks can go there, borrow at 1%, then relend to finance business credit lines and maintain commercial credit!
Once the weak banks fail and the System Flushes its crap - takes 12 months, thereabouts - confidence is slowly restored and credit/mortgage/CDO markets unfreeze and start to catch a bid!
Why? Because all the Dog Fuckers got flushed and only the Strong Survive. Hence, a restoration of confidence!
The Great Depression was only Great because Credit was unnecessarily restrained, long after the initial crash. That was the result of "unwitting" Government policy, or so we're told!
In the end, yes, Business slash jobs, employment skyrockets (thank God for UI!), home prices dump 30%, Banks fail, markets dump more, lots of small business fail. UGH. Painful.
In the end, its a severe recession.
But after 18 months or so, when prices normalize, the economy gets jacked for another Huge Bull Run. Where does the Capital come from to juice the next big move? Creative Destruction. For every long there is a short. The Smart Money - like Rogers - made a killing on all these over-leveaged Banks going under - Citi, Lehman, Goldman, Merrill etc etc. There's a short for every long! All that market cap from shitty companies is transferred into the pockets of Smart Money who then reinvest in Sounder Banks, Investment Banks and other viable Growth Industries! That reinvestment through share equity stimulates business investment, construction, workforce expansion. JOBS!
Thats what Capital Mobility is all about.
The alternative? 8 Trillion PLUS. The end nowhere in sight. And future growth opportunities pissed away in unending sideways markets for X YEARS.
