Wall Street fears for next Great Depression

[SlowDownFast]

*cross posted from LBN:
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3228670

Wall Street fears for next Great Depression

By Margareta Pagano, Business Editor
Sunday, 16 March 2008

Wall Street is bracing itself for another week of roller-coaster trading after more than $300bn (£150m) was wiped off the US equity markets on Friday following the emergency funding package put together by the Federal Reserve and JPMorgan Chase to rescue Bear Stearns.

One UK economist warned that the world is now close to a 1930s-like Great Depression, while New York traders said they had never experienced such fear. The Fed's emergency funding procedure was first used in the Depression and has rarely been used since.

A Goldman Sachs trader in New York said: "Everyone is in a total state of shock, aghast at what is happening. No one wants to talk, let alone deal; we're just standing by waiting. Everyone is nervous about what is going to emerge when trading starts tomorrow."

In the UK, Michael Taylor, a senior market strategist at Lombard, the economics consultancy, said on Friday night: "We have all been talking about a 1970s-style crisis but as each day goes by this looks more like the 1930s. No one has any clue as to where this is going to end; it's a self-feeding disaster." Mr Taylor, who had been relatively optimistic, has turned bearish: "It really does look as though the UK is now heading for a recession. The credit-crunch means that even if the Bank of England cuts rates again, the banks are in such a bad way they are unlikely to pass cuts on."

Mr Taylor added that he expects a sharp downturn in the real UK economy as the public and companies stop borrowing. "We have never seen anything like this before. This is new territory for us. Liquidity is being pumped into the system but the banks are not taking any notice. This is all about confidence. The more the central banks do, the more the banks seem to ignore what's going on."

read more:http://www.independent.co.uk/news/business/news/wall-street-fears-for-next-great-depression-796428.html

[LaStrega]

1. I just posted this in another thread ...

A friend of mine is an economical analyst, he told me yesterday that he predicts the first quarter of '09 will show a bit of improvement, then the bottom will drop out and we'll be cast into the worst recession seen in his or my lifetime.

Recession is scary, but depression is flippin' horrifying.

[Speck Tater]

6. I've read four different economists now who predict

that the bottom will fall out of the stock market somewhere around the four quarter of 2008, give or take a month or two.

[LaStrega]

8. oh fuck me.

I'm doomed.

Anyone wanna move in? I've got a beautiful 5-bedroom house on 1.2 wooded acres, situated approximately 45-minutes south of the Twin Cities.

Help!

[Trajan]

2. What took Wall Street so long to notice ?

What progressives have been 'fearing' (more like expecting) from long term republican control of the nation's institutions .....

Same as it ever was ....

If you starve the bottom, there is no wealth to accumulate .....

[Beregond2]

3. ?

They are "in a state of shock" and "aghast?" Why? Isn't this exactly what they have been begging for since the eighties? They got their wish: an unregulated market. This is what happens to unregulated markets. Why the surprise? Don't they teach any history to economics majors?

[Purveyor]

4. Keeps some cash on hand because there could very well be a 'banking holiday' for

3-5 days as the 'Fed' attempts to print more paper and fund the failing banking system.

Who knows what those 'cash dollars' might be able to buy when/if this happens but as least in the early hours of this 'holiday' you might be able to stock the pantry and top off the fuel tanks.

Oh...THIS IS NOT JUST A DRILL, imho. This is the real deal, folks...

And if I'm wrong? Well just redeposit when things seems more stable.

[SlowDownFast]

5. Times source suggests 'emergency bank holiday' possible

In an article in the London Times today " Which bank is going to follow the Bear?" - the answer is given as Lehman.

Furthermore the article goes on to quote Chris Whalen, of the Wall Street consultancy Institutional Risk Analytics as saying: “This is going to go all the way up the chain". He also said that should the US Federal Reserve, the US Treasury and the Securities and Exchange Commission not devise a broad rescue plan to address the credit turmoil on Wall Street this weekend, “I would not be surprised to see an emergency bank holiday announced. That hasn’t happened since Roosevelt.”

During the Depression, 75 years ago almost to the day, Franklin Roosevelt declared a four-day bank holiday, which stemmed a frantic run on banks. Mr Whalen added that should banks such as Lehman continue to be unable to sell the billions of dollars of mortgage-backed securities held, they were doomed. He said: “Broker dealers have to be able to get rid of assets. If they are illiquid, they die.”

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3556815.ece

[Earth Bound Misfit]

7. NY Times points to Lehman also.......

Already, investors are considering whether another firm might face financial problems. The price for insuring Lehman Brothers’ debt jumped to $478 per $10,000 in bonds on Friday afternoon, from $385 in the morning, according to Thomson Financial. The cost for Bear debt was up to $830, from $530.

http://www.nytimes.com/2008/03/15/business/15risk.html

[Narkos]

9. We actually need a depression

to get Americans to wake their asses up to uncomfortable realities. Maybe we need a complete economic meltdown every generation so that people finally realize that markets simply can't regulate themselves? Shit, I hope not.