Meltdown (and no, it’s not the heat)

Daily Mail ,1929

Daily Mail ,1929

In case you are living in a coocooned world, you might want to take a look at the Headlines today and read about what is being termed as Meltdown Monday. In the US, Congress rejected a $700 bn rescue package that many think would have just served to save the bigspenders at the expense of taxpayers. “No government ever stepped in to bail out an SME in danger”.

Casualties of the storm include 6 big institutions/banks among which one finds Fortis bank, just bailed out by a combination of the French, Belgian and Luxembourg governments. Bradford & Bingley hit the bottom in the UK and its assets were sold to Santander – the Spanish bank that is receiving praise for its diligent and cautious planning over the past months. The FT hints that Santander’s careful planning could have been emulated around Europe had Jean Claude Trichet’s ECB had more clout in banking regulation.

The same FT’s editorial laments the lack of a pan-European banking market (calling it an admirable aim) but also points out that for now it is the national governments that are writing the (bailout) cheques. Dexia, another troubled bank means that the second bank closer to home has been hit. Iceland has seen its first banking institution go under and is literally rocked by the storm as it’s dependence on wholesale funding exposed it to the brunt of possible effects. The Icelandic government offered to inject €600m of equity for a 75 per cent stake in Glitnir Bank – that represents €2,000 for every inhabitant of the island.

An interesting question is how will small countries with big banks weather the storm. The problem right now is that there seems to be no answer. Prepare for a daily countdown of victims of the crash. It’s not Black Tuesday yet… but for now we’ve had Meltdown Monday. Oh. In case you were wondering how much cash you might need to weather a 1929 kind of crash, economists calculate that having three months worth of liquidity might be a good start.

This has been j’accuse…. reading the Financial Times so you don’t have to.


8 responses to “Meltdown (and no, it’s not the heat)

  1. Hi Jacques…I have been waiting for this blog post eagerly…maybe now Mark Anthony Falzon can illuminate the greenies and the graffitis on the workings of capitalism (though kudos to him for a great analysis – on another subject- on Bondiplus yesterday night)

    la petite merde

  2. here is a nice article on the bail out that never was

  3. easy now, no melt down as yet. Distinguish between cash-flow and asset quality. The market can not tell the difference and has created a wholesale cash flow crises (credit cruch) scenario. Europe is being active in encoraging takeovers (Lloyds/Hbos) and where this is not possible Governments step in. France has guaranteed all assets (not shareholders of course). Same noises from the UK.

    Last meltdown meant that share prices took some 30 years plus to recover. We ae nowhere near that…yet

    next stage…see what Bush has to say…what a bad dream was Mr Bush…Clinton will be remembered gor cigar antics. If only we could say the same for Bush.

  4. Snippet mill-programm:

    F’hin minnhom Mark Anthony (kudos for clarity of thought) deher perpless immens. “Ma nafx x’jrid jghid biha value-free society, ma nistax nifhem x’ried jghid biha…” Lura fl-istudio u l-Arcisqof jispjega hekk: “Ghax per ezempju hi Lou, ha nghidlek, darba gie ragel fuqi u qalli…” Imbaghad jigi Ranier jinterpreta x’seta (forsi) kellu f’mohhu l-Arcisqof meta lissen dawk il-kliem: “Forsi mhux value-free society precizament ried jghid izda…”

  5. fabrizioellul

    yes, it was especially interesting the part where Cremona said that our youth are being brainwashed by secularism.

  6. Meltdown it may not be but the quality of this blog is slowly declining. Postings are either long chunks of quoted text, or some sort of round-up of the news (in the same vein as the “write a summary in your own words” assignments we got at school) or about the author’s shopping which seems to be little more than gizmos and trinkets.

    Maybe you should take a break. 🙂

  7. No doubt this blog writer needed a break Fausto. In fact this is one – hence the decrease in quantity and quality of blog posts.

    On the other hand if the length of a break is proportional to the decline in quality… it does not say much for Thermidor does it?

    🙂 Here’s to your return from the break… and to a higher level of quality of course.

  8. No, length of break is directly proportional to the potential to bore. You woundn’t want me to post about bathroom fittings …

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