Scrambling to Cleanup After a Cat 4 Financial Storm

[marions ghost]

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/17/AR2008091703834.html

Scrambling to Clean Up After A Category 4 Financial Storm

By Steven Pearlstein
Washington Post Staff Writer
Thursday, September 18, 2008; A01

You know you're in a heap of trouble when the lender of last resort suddenly runs out of money.

Having pumped $100 billion into the banking system and lent $115 billion more to rescue Bear Stearns and AIG, the Federal Reserve was forced to ask the Treasury yesterday to borrow some extra money to replenish its coffers. If there was any good news in that, it was that investors here and abroad were eager to help out, having decided that the only safe place to put their money is in U.S. government securities. Indeed, demand was so brisk at one point yesterday that, for an investor, the effective yield on a three-month Treasury bill was driven below zero, once the broker's fee was figured in.

This is what a Category 4 financial crisis looks like. Giant blue-chip financial institutions swept away in a matter of days. Banks refusing to lend to other banks. Russia closing its stock market to stop the panicked selling. Gold soaring $70 in a single trading session. Developing countries' currencies in a free fall. Money-market funds warning they might not be able to return every dollar invested. Daily swings of three, four, five hundred points in the Dow Jones industrial average.

What we are witnessing may be the greatest destruction of financial wealth that the world has ever seen -- paper losses measured in the trillions of dollars. Corporate wealth. Oil wealth. Real estate wealth. Bank wealth. Private-equity wealth. Hedge fund wealth. Pension wealth. It's a painful reminder that, when you strip away all the complexity and trappings from the magnificent new global infrastructure, finance is still a confidence game -- and once the confidence goes, there's no telling when the selling will stop.

But more than psychology is involved here. What is really going on, at the most fundamental level, is that the United States is in the process of being forced by its foreign creditors to begin living within its means.

That wasn't always the case. In fact, for most of the past decade, foreigners seemed only too willing to provide U.S. households, corporations and governments all the cheap money they wanted -- and Americans were only too happy to take them up on their offer.

The cheap money was used by households to buy houses, cars and college educations, along with more health care, extra vacations and all manner of consumer goods. Governments used the cheap money to pay for services and benefits that citizens were not willing to pay for with higher taxes. And corporations and investment vehicles -- hedge funds, private-equity funds and real estate investment trusts -- used the cheap financing to buy real estate and other companies.

(more at link)
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My concern is: So now houses, cars, college educations, health care and vacations are examples of OVER-spending by consumers???????

[bemildred]

1. "After"? What is this "after" stuff? nt

[marions ghost]

2. GOOD point

Whew, dodged that bullet, didn't we Brownie?

Heckuva job, Skeletor....

[dixiegrrrrl]

3. yeah...I actually went out and splurged on food yesterday.

Silly of me to overspend, I know.
Especially after I had gone a spree of writing checks for the mortgage, power, telephone and cable.
Just comes over me like a big uncontrollable urge every month or so.

I should prolly seek help.

[marions ghost]

4. Go Dixie, tighten your belt sistah

First it was 'Go Forth and Spend, Patriots!'

Now it's 'Let Us All Suck It In for the Homeland...'

mixed massages?