Comments on: International Trade Seizing Up Due to Banking Crisis (Updated)

By: Trade Show Displays

Trade Show Displays — Thu, 04 Dec 2008 12:13:00 +0000

Trade show displays are the physical screens banners and other paraphernalia used to fill a temporary exhibit space at a trade fair.

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Trade Show Displays

By: Anonymous

Anonymous — Mon, 13 Oct 2008 06:40:00 +0000

OK. I agree with the careful argument put forward. What we all need to do however as business leaders is to not respond with fear and negativity as last time I checked, WE are responsible for doing our bit for sentiment.

By: duped

duped — Sun, 12 Oct 2008 21:09:00 +0000

I am trying to fathom the CDS (and other larger derivatives) issue. As I understand , it is somewhat of an insurance product against some type of default/credit event.
Now, if there are multiple layers of circular bets ( lot of them leveraged ones ), a default is going to be like a hot potato being bounced around in circles, but that is not going to change the original default event, just the transfer of this loss from one party to another ( in case defaults continue in cascades ) or stop with a solvent party who will eat up the loss. So, if I am very solvent and strong today and the other parties in the game start defaulting, the loss stops with me or with my default. It seems that these government interventions are aimed at helping some of these institutions weather these CDS obligations thru tax-payer money and hopefully stop these cascading transfer of defaults thu CDS arrangements. This would work , if the number and amounts of defaults are within the system's capacity to handle these. It seems that even if they mostly offset each other, their extent is huge. And the juggernaut of more and more defaults has been set in motion by the recession that has started.
So, this seems to be a downward spiral.
It is quite obvious as to why these institutions do not trust each other--> each has its own CDS bets to cover, they have no clear idea as to other ones' bets, no prediction as to whose bets will come calling first, and when these bets will end up with them? They probably do not have enough money to pay most of the bets they have placed, if they go against them, they all are hoarding money and not lending money to each other, since they can not predict when next round of which CDS bets will be called to pay up. So they are not honoring each other's letters of credit.
It is not likely that governments can buy up all these defalts/credit events, other than creating more money from thin air and they should do it fast and then declare war on these circular bets called CDS and get rid of them. It may be too late to stave off a recession, but may be able to prevent deep depression.
Lawyers will make it certain that the painful process is prolonged and likely sabotaged. We have not even heard from lawyers regarding their interpretations of these CDS contracts.

By: Casper

Casper — Sat, 11 Oct 2008 11:52:00 +0000

Time for a super credit insurance fund ?

Now, what we need is a Global Credit re-Insurance fund backed by government, but with its initial capital raised from various mega insurers around the world. The fund would be staffed by legendary insurer such as Warren Buffet who know the odds. This is to put to rest the counter party risk and so that corporation and banks that are not a credit risk can start borrowing again. This will also eliminate the uncertainty in the CDS market once and for all (rather than moving it to an exchange – we can do that later) as now all credit insurance contract are now centrally reinsured/cleared. Those that are no longer credit worthy would not be sold an insurance at a acceptable price and would need to be allowed to go down.

By: cubanbob

cubanbob — Fri, 10 Oct 2008 23:17:00 +0000

Some fool above stated the solution to letter of credit fears is to nationalize the banks. Brilliant. And what if the issuing bank is the Bank of Zimbabwe. You want that letter of credit? Another brilliant financier states well if buyers and sellers use the same bank such as Citibank or HSBC problem solved.Not so. Citibank NA is not the same Citibank as the one in Argentina. Separate banks legally. That is why you cannot deposit funds in Argentina with immediate credit to your account in New York. A holding company is not the same thing as the bank company.

If you don't have a clue about what your talking about shut up and learn before mouthing off and in the meantime for God's sake don't vote as well.

Here is a simple clue:when banks do not trust other banks we are in a world wide disaster. It means not only is your credit worthless but so is your money that is worthless, since there is no mechanism for transferring funds because no bank will trust another bank to cover the float time. They won't take the risk. They can't, they have a fiduciary duty to their depositors. It is bizarre that I can borrow money from my own bank at a lower rate than my bank can borrow at LIBOR. And that bank is a major player. They would actually be losing money by lending me money. If this goes on much longer a recession will be the least of our problems. See you on the bread line.

By: Anonymous

Anonymous — Fri, 10 Oct 2008 16:05:00 +0000

I agree with posters who want to thank Yves for her wonderful, wonderful blog. I think at this point we ought to bombard our congresspeople with links to Naked Capitalism and tell them to read it. Maybe a few will. The one note of cheer in all this is that the Internet offers a powerful community of minds who can brainstorm at great speed–something not available in the 1930’s. This intellectual resource is something to be encouraged by. Don’t despair, folks; focus, think, and email!

By: Anonymous

Anonymous — Fri, 10 Oct 2008 15:20:00 +0000

Actually as I understand,

a lot of banks are truly reluctant now to issue letters of credit.

In short, try not to visit third world country where there is little in place of "emergency supplies" of say grain, wheat, etc etc hint hint

By: Unscripted Thoughts

Unscripted Thoughts — Fri, 10 Oct 2008 13:26:00 +0000

This sounds like confirmation of Nouriel Roubini’s assertion that “the wheels are coming off.” It also very well could push us into the abyss….hope you have your seat belts on.

By: wintermute

wintermute — Fri, 10 Oct 2008 12:42:00 +0000

I want to see Yves as Treasury Secretary and Michael Shedlock in charge of the Fed. (I know Michael wants the fed paradigm gone – but it has to be done in a controlled fashion over serval years).

By: Anonymous

Anonymous — Fri, 10 Oct 2008 11:46:00 +0000

When I go to the supermarket I have to pay first and the get my cornflakes, so where is the problem?