Credit markets tighten, even as stocks relent

[many a good man]

Source: World news services

NEW YORK — Wall Street rebounded early today after its biggest sell-off in years. But the seized-up credit markets where businesses turn to raise money showed no sign of relief.

A key rate that banks charge to lend to one another shot higher, a tightening of the availability of credit that could cascade through the economy.

The benchmark London Interbank Offered Rate, or LIBOR, that banks charge to lend to one another rose sharply today, making it more expensive and difficult for consumers and businesses to borrow money. In addition, credit card debt and more than half of adjustable-rate mortgages are tied to LIBOR, so an increase isn’t welcome for many consumers.

...

The main worry for traders is that a lack of a plan will make it nearly impossible for some companies to fund basic operations like making payroll. Participants in the credit market buy and sell debt that companies use to finance operations.

Read more: http://wenatcheeworld.com/apps/pbcs.dll/article?AID=/20080930/NEWS02/709309901/1005

[tandot]

1. "...make it nearly impossible for some companies to fund basic operations like making payroll"

Thanks for posting.

[lapfog_1]

2. But hey, we sure taught those fat cats on Wall Street a lesson.

No bailout money from the taxpayers!

Besides this was just another fake crisis, nothing bad will happen, it was a scam.

And heck, even if there really is a problem and we have a 2nd Great Depression, that just gives us the opportunity to remake things the way we want them. (no thought given that fascists might well take over instead of socialists)

BTW.... :sarcasm:

(all of these feelings have been expressed here by large numbers of DUers).

[MilesColtrane]

4. What was the twisted logic of some during the Vietnam war?

"We had to destroy the village, to save the village."

...or, as I like to call it, the Nader philosophy.

[lapfog_1]

6. Those that cannot learn from history are doomed to repeat it.

And, oh yeah, we are not nearly as equipped right now to deal with a depression.

In 1930s America, a much much higher percentage of people lived and worked on farms. Farms were far more diversified than they are now, and ownership was not in corporate hands. Nor were farms as mechanized and dependent on fertilizers and chemicals. Going over to the neighbors to trade some of your home grown carrots for some of their corn is just not likely for a vast majority of Americans.

But that's how our grandparents (or great grandparents) got through the first one.

I wonder how we will get through this one?

[Coventina]

7. I was watching 700 Club a few years ago

You know, just for giggles.

Anyway, Pat Robertson was giving out financial advice to callers.

One woman called in to get advice on how to deal with her family's extreme poverty.

His advice?

Raise chickens for eggs & slaughter and start making your own clothes.

My boyfriend at the time was watching it with me and said, "Yeah, that's great advice for someone living in a one-bedroom apartment in the middle of the city!"

Also, how many poor people own sewing machines? With the time value of money & the relative cheapness of clothes, sewing has become a high-end hobby.

Society has really changed. We won't have another Depression like the 1930s. It will be much, much worse I fear.

on edit: typo

[Stellabella]

11. And, he who does not discipline himself will be disciplined.

Eventually.

[enlightenment]

19. Burke said it best.

"Men are qualified for civil liberty in exact proportion to their disposition to put moral chains upon their own appetites; in proportion as their love to justice is above their rapacity; in proportion as their soundness and sobriety of understanding is above their vanity and presumption; in proportion as they are more disposed to listen to the counsels of the wise and good, in preference to the flattery of knaves. Society cannot exist unless a controlling power upon will and appetite be placed somewhere, and the less of it there is within, the more there must be without. It is ordained in the eternal constitution of things that men of intemperate minds cannot be free. Their passions forge their fetters."

Edmund Burke, 1791

He was talking about the aftermath of the French Revolution (and probably more moralistically than is my wont, but the bottom line is relevant. True liberty is dependent on our ability to control ourselves).

[Coventina]

5. Hitler was overjoyed when Germany's economy collapsed

He saw it (correctly, as it turned out) to be his big opportunity.

Desperate people will believe any charasmatic figure who tells them who is to blame and what is to be done.

on edit: spelling

[brentspeak]

8. For anyone knows, the banks are freezing credit just to force Congress to pass the bailout

[whosinpower]

10. That is what I think nt

[sandnsea]

18. Yeah, all 10,000 of them

There's a "forward this email" going around between the bank Presidents as we speak.

:eyes:

[SahaleArm]

22. Please - Regional Banks and Credit Unions aren't freezing credit.

It's the big boys on the street waiting for your capitulation.

[davekriss]

16. The fascists took over December 12, 2000

The only coming difference is crisis may cause the friendly facade to fall.

The illusion of freedom in America will continue as long as it's profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way, and you will see the brick wall at the back of the theatre.
--Frank Zappa

[stray cat]

3. Not getting a pay check won't hurt anyone on main street....

We have lots of money saved up in the bank to live on. Oh wait - we don't?

[many a good man]

9. NYT: "There is no market any more"

Credit Strains Worsen; U.S. Stocks Surge

By MICHAEL M. GRYNBAUM
Published: September 30, 2008

Stocks staged a broad recovery on Tuesday after Monday’s big sell-off. The Dow Jones industrials gained 485.21 points, halving the 777-point decline on Monday.

But the health of the economy and the global financial system was by no means assured.

Strains worsened overnight in the credit markets, the plumbing of the economy that many businesses rely on to finance routine expenses like utilities and payroll. Banks sharply increased their lending rates on short-term loans, sending Libor, a globally watched benchmark rate, to its highest level ever.

“The money markets have completely broken down, with no trading taking place at all,” said Christoph Rieger, a fixed-income strategist at Dresdner Kleinwort in Frankfurt. “There is no market any more. Central banks are the only providers of cash to the market; no one else is lending.

...

Analysts and economists have pointed to the problems in the credit markets as posing a more serious threat to the health of the economy, at least in the short term, than the recent declines in stocks.

...

The German chancellor, Angela Merkel, said that the quick passage of a rescue package was “the precondition for creating new confidence on the markets — and that is of incredibly great significance.”



more: http://www.nytimes.com/2008/10/01/business/01markets.html

[Hannah Bell]

12. Two words: Capital Strike. If they can't have public money, they'll freeze theirs.

We'll soon be begging them to take our money. "Anything, anything, just give us jobs & bread!"

That's teach us what kind of slaves we are.

May the "masters of the universe" all get heart disease.

[lelgt60]

13. Then set up a direct federal loan bank and let them twist in the wind n/t

[Hannah Bell]

14. good idea.

[NeoConsSuck]

15. That's what this whole bailout should have been.

but it makes too much sense. Instead of re-capitalizing these banks that made these risky bets, loan the 700 billion to companies that need it.

The big banks keep their goddamn toxic waste on their books, smaller companies can get the capital they need, credit markets don't freeze up, and the taxpayer doesn't get ripped off.

But Paulson is not about looking out for the taxpayer. His sole purpose is to make sure his rich buddies stay rich at the taxpayer expense. Why do you think he resisted any caps on CEO pay? Truly a case of the fox guarding the hen house.

And yesterday's stock crash was a warning to the middle class: 'This is what will happen if you don't pay for capitalist corruption'. And it provided political cover so politicians can now vote for this bailout (oops, I meant 'Rescue').

What an effing sham.

From WSWS.ORG:

The naked class character of the proposal being promoted by the leadership of both major parties was spelled out by Washington Post columnist Steven Pearlstein, who insisted that those opposed to the scheme would have to come “to the understanding that the only way to get out of these situations is to have governments all around the world borrow gobs of money and effectively nationalize large swaths of the financial system so it can be restructured, recapitalized, reformed and returned to private ownership once the crisis has passed.”

In other words, “gobs of money” are to be seized from the people to protect the wealth of the major shareholders and investors and place the big banks under the wing of the government until they are profitable enough to be turned back to these same financial oligarchs.

To call this a “plan” is a gross misrepresentation. It is nothing more than a decision to hand over more than $700 billion in taxpayers’ money to Treasury Secretary Paulson, the former CEO of Goldman Sachs, to use as he sees fit in buying up worthless paper assets from his former colleagues on Wall Street.

Never in history has one US official been granted such sweeping powers. Even the staggering figure attached to this proposal is viewed by most analysts as only a first installment, as the totality of worthless assets on the books of the major financial institutions is many times higher.


http://www.wsws.org/articles/2008/sep2008/bail-s30.shtml

[lelgt60]

17. And watch how fast credit markets suddenly "unfreeze" n/t

[Odin2005]

21. Take off the tin-foil hat. n/t.

[Odin2005]

20. But, but, the tin-foilers told me this was all a big conspiracy and there is no crisis!!!

:eyes:


To be serious, though, this is not looking good.