naked capitalism

bill says:

This is a leading indicator that we are finally putting in a bottom. I hope!

wintermute says:

Bill. Sorry, no. There can’t be a bottom until the series of train-wrecks ahead for 2009/10 are pushed aside. One year on and we are still early into the pain process…

http://www.nakedcapitalism.com/2007/10/why-countrywide-is-modifying-mortgages.html

Check the chart out – a picture says a 1,000 words anyway.

Anonymous says:

There is a big difference between credit markets pulling back by say 20-40% and a total systemic collapse.

The former is brutally painful; the latter, possibly fatal for the international economic system.

So yes, it’s root, root root for SOME credit availability.

I still can’t believe the shipping/letter of credit situation. That also has to get back to normal pronto. Food rotting on the docks is not what I call a ’situation under control.’

Anonymous says:

I just hope at the end of this all the obsolete industries disappear.

It seems more likely that we will keep them going at the expense of new and better ones though.

Thanks a bunch Bernake.

printfaster says:

Yves,

It is not the commercial banks that are unsticking and buying CP, it is the Fed. Quoting also from Bloomberg:
The Fed said last week it will create a special fund to buy commercial paper, seeking to unblock the financing that drives everyday commerce for American

Even commercial paper is being nationalized. Perhaps the Fed will recognize sheets of toilet paper as foreign currency and buy them to inject more funds into the economy. We should be so lucky. All of the money is being sent to incompetant bank executives so they can hold on to their precious overpaid jobs.

Cash Mundy says:

FairEconomist: your A2/P2 comment is interesting. I got curious and found out where the Fed Publishes this info, and a description of A2 vs. P2 paper at Calculated Risk.

Juan says:

Faireconomist,

Such an amazing spread deserves a ‘picture’:
http://www.federalreserve.gov/releases/cp/a2p2spread.gif

Anonymous says:

I can’t help but feel we could be in for a very long haul. After all, what got the markets into this mess was the provision of finance backed by funders who just couldn’t say no to borrowers with improperly understood risks for short term gain. And what are central gov’ts providing to ease the way out… ?

Wendy says:

Yves,

One reason that I have loved your blog so much is that intelligent people were able to disagree with respect. Those who are experts have been respectful to others who are asking questions and so on. I hope that you will act as a moderator. Offering an opinion, even a very different one is always welcome. Calling others a “moron” and acts such as this are not constructive and they rob your blog of class.

Thank you.

doc holiday says:

OT; this was nice, from a post in another part of The Universe, by someone named, Dr. Michael Yanakiev

> Richard Dooling wrote in the New York Times: "Somehow the genius quants – the best and brightest geeks Wall Street firms could buy – fed $1 trillion in subprime mortgage debt into their supercomputers, added some derivatives, massaged the arrangements with computer algorithms and – poof! – created $62 trillion in imaginary wealth."

Those algorithms were based on risk assessments that were seriously flawed, based only on the risk to the market at that moment, rather on cold, hard empirical data about a person's ability to pay and what would happen if a lot, rather than a few of them, stopped. As George Dyson (son of the quantum physicist Freeman) wrote in Edge last week: "The problem starts, as the current crisis demonstrates, when unregulated replication is applied to money itself. Highly complex computer-generated financial instruments (known as derivatives) are being produced, not from natural factors of production or other goods, but purely from other financial instruments." What is also becoming clear is that the financial markets are far more automated than ever before. There is a growing sense that much of this was made by machines, with the quants feeding the beast ever more intricate lines of code. Dooling has a growing conviction that we are now at the mercy of a financial system based on "arrangements so complex only machines can make". It seems we are at the mercy of the machine.

Not a Great Depression, a Great Rebalancing

http://discussionleader.hbsp.com/haque/2008/10/the_great_rebalancing.html#comments

Arete says:

Yves,
there was a concerted effort by Chase NY to lend 1month cash (unsecured) in the market friday. Citi bank joined in after the market started moving.
To give you an idea of the magnitude of this, they started lending at approx. 5% (way above 1month usd libor note), and ended up lending at 3% (could have been lower after I left. The amounts involved were not trivial and it explains alot of the movement in the eurodollar strip, the swap spreads and probably even the long end of the usd irs curve. I would guess Chase got a little persuasion to start lending out the cash, it wasn’t coming from trader level in any case!
So what…. well USD libors should collapse monday. So what again… as one person said yesterday, “the panic to get out of panic trades has started”…. and there are ALOT of panic trades out there that I think will all have to exit a very small door next week as sentiment comes back from the brink….

Anonymous says:

A historical comparison and some explanation for CP market conditions:

http://www.federalreserve.gov/pubs/feds/2004/200418/200418pap.pdf

piglet says:

How is a “high” of 4.28% choking the economy? You seriously think the survival of the economy lies in the difference between 4.28% and 3.45% yield on commercial paper? Utterly ridiculous.