HowardForbes Fool- More Cash for Derivatives
October 31st 2008 14:07
Real Crash- Looking at Capitalism and its Laws:
Hanging out in the Bronx, as the system goes bye bye
While the stories continue of "wait till the real estate market comes back" "wait till the mortgages come back" and what not, the pit is expanding, and so is the bailout. The derivative hole alone is hitting above $700 billion, actually $755 billion so much for that. Other dollar swap lines are opening up. But, that great Republican adviser, Steve Forbes, insists that the bailout is the epitome of the free market, and it's all the government's fault. Go figure.
Says the Forbes creature:
Belatedly, but thankfully, governments recognized that the only way to get credit flowing again was for them to make quick and direct massive infusions of new equity into beleaguered banks, as well as commit to other emergency measures hitherto unimaginable.
If sensible rescue efforts continue--and they will--the immediate crisis will quickly pass. Shell-shocked businesses and consumers won't recover rapidly from the trauma of recent months, especially as we now cope with recession. But the downturn shouldn't be prolonged: The economy here and those overseas should start to pick up no later than next spring. (Dream on). (End quote).
Now, The Federal Reserve created a $15 billion swap line with the Reserve Bank of New Zealand on Oct. 28, and creating $30 billion swaps lines with the central banks of Brazil, Mexico, Korea and Singapore, for a total of $135 billion in credit lines. This currency swaps program began in December, 2007, with $20 billion to the European Central Bank and $4 billion to the Swiss National Bank, for a total of $24 billion, and has been expanded repeatedly since. The Fed now has such agreements with 14 central banks, for a total of $755 billion. As the program expands, the financial derivatives fall apart even more.
The Fed also cut the Fed Funds target rate and the discount rate by half a point this week, and launched its Commercial Paper Funding Facility, buying $146 billion of commercial paper in a week. As of Oct. 29, the Fed had $1.2 trillion in loans to financial institutions outstanding, including $301 billion to depository institutions via the Term Auction Facility, $298 billion to investment banks, $111 billion in discount window loans, $85 billion to AIG, and held $96 billion in asset-backed commercial paper. (AIG is a pure derivatives black hole).
Why not declare the whole pile to be junk, at least as far as the derivatives, Cayman Islands stuff, freeze it, and issue new credit for production? Go back to the American System of protectionism, tariffs and reality. LaRouche told you so.
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