naked capitalism

doc holiday says:

I’m still trying to figure out what Fiotakis was putting down there:

“If foreign capital inflows remain constrained independently, excessive rate hikes could prove less effective in stabilising local assets and could pose downside risks to growth in the medium term.”

That seems to fit with this puzzle bit from “the internet”:

Meanwhile, Bank of England governor Mervyn King was particularly downbeat in a speech last night, highlighting that the recapitalization of the banking system was a result of an “extraordinary, almost unimaginable, sequence of events” which had been triggered by the Lehman’s collapse on Sep 15. He referred to the global credit crunch and the slowing in capital inflows into the UK, saying “…Unless they (capital inflows) are replaced by other forms of external finance, the adjustments in the trade deficit and exchange rate will need to be larger and faster than would otherwise have occurred…”

I’m still a little foggy on this though?

Richard Kline says:

I'm with Fiotakis on slingshot 'recoveries;' watch out for the snap back. Volatility is only increasing. We can think about 'recovery' and 'a sustainable bottom' when volatility declines. Today's big run-ups look all to like pump-and-dump surges on the faux 'news' or [meaningless] Fed cuts. The Fed buying commercial paper is troublesome; at $60B it would appear it's near frightening. If the Fed is buying and the MMs aren't particularly, that is plenty indication we are still deep in the wilderness. I know, I know, "The Fed is trying to prevent a depression by the main force of its balance sheet." When that balance sheet is expended, as it very nearly is, without making any substantive improvement in this economic down cycle, we get to confront the 'night' of the downturn with a busted currency, too.

And consider this: Where is Iceland going to get the revenue to pay that 18% on their nationally owned banks? It's one thing to promise, another to deliver. Recall, if you will, those lip-smacking CD rates at the S & Ls pre-blowout. Iceland is looking too like a S & L with a deposit guarantee. Just so the Fed's promises: it all looks good, but where is the revenue to pay for all this?

Anonymous says:

Bank of England governor Mervyn King was particularly downbeat in a speech last night, highlighting that the recapitalization of the banking system was a result of an “extraordinary, almost unimaginable, sequence of events” which had been triggered by the Lehman’s collapse on Sep 15.

*********

Perhaps the governor should stoop to reading a few econ blogs like this one from time to time. Perhaps then it wouldn’t have seemed so “unimaginable.”

eh says:

DXELX — +51.8% yesterday.

I would say demand destruction in western economies is only in the early stage. And for commodity producers and exporters of manufactured goods — which describes many emerging economies — that means bad news for a while.