Chicken Little's Day?

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.

We are no better off today than we were 3 months ago because we have a decrease in the equity positions of banks because other assets are going sour by the moment.

-- Representative Paul Kanjorski

Our economy has been in perhaps greater trouble than we knew. If things are this bad, it's difficult to imagine how any stimulus bill can help, or what possibly can help, as we seem to be atop some serious systemic problems. While I'm on the subject, I'll bring out another scare video with Peter Schiff, the guy famed for being spot-on anent this financial downturn, when everyone else was blowing off any negative forecast:

The argument is that any stimulus bill will only make matters worse. Damned if you do, damned if you don't. Though, I suppose he's saying the damnation won't be as bad if we let the market sort itself out and take our medicine now, rather than striving to stave off the necessary economic pain that we must suffer, which will arguably only make matters worse later on, notwithstanding better regulations now that foster transparency in financial dealings, I presume.

More than a little hysteria here? I cannot tell. Although I gather there is considerable pain out there, we don't seem to be in anything like the straitened circumstances suggested, as life seems to be going on fairly normally for perhaps the vast majority of people. But is this just the calm before the storm? That question remains.

+++++++

February 16, 2009

Andrew Sullivan now links a Portfolio.com post that debunks the Kanjorski story. I was a little suspicious, never having heard of the guy before, but he is a Congressman, after all. Shouldn't that mean something!? Not by itself apparently.

Chicken Little's Day?

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.

We are no better off today than we were 3 months ago because we have a decrease in the equity positions of banks because other assets are going sour by the moment.

-- Representative Paul Kanjorski

Our economy has been in perhaps greater trouble than we knew. If things are this bad, it's difficult to imagine how any stimulus bill can help, or what possibly can help, as we seem to be atop some serious systemic problems. While I'm on the subject, I'll bring out another scare video with Peter Schiff, the guy famed for being spot-on anent this financial downturn, when everyone else was blowing off any negative forecast:

The argument is that any stimulus bill will only make matters worse. Damned if you do, damned if you don't. Though, I suppose he's saying the damnation won't be as bad if we let the market sort itself out and take our medicine now, rather than striving to stave off the necessary economic pain that we must suffer, which will arguably only make matters worse later on, notwithstanding better regulations now that foster transparency in financial dealings, I presume.

More than a little hysteria here? I cannot tell. Although I gather there is considerable pain out there, we don't seem to be in anything like the straitened circumstances suggested, as life seems to be going on fairly normally for perhaps the vast majority of people. But is this just the calm before the storm? That question remains.

+++++++

February 16, 2009

Andrew Sullivan now links a Portfolio.com post that debunks the Kanjorski story. I was a little suspicious, never having heard of the guy before, but he is a Congressman, after all. Shouldn't that mean something!? Not by itself apparently.