tag:blogger.com,1999:blog-3782644139927778760.post-89548768548813904802008-03-11T12:43:00.000-04:002008-03-11T12:43:00.000-04:002008-03-11T12:43:00.000-04:00March 10, 2008<BR/><BR/>To: naked capitalism.com<BR/><BR/>From: Earl L. Crockett<BR/>Re: Continuing conversation re: “Covert Nationalization of the Banking System”<BR/>A follow up to: “Through the Looking Glass and Down the Rabbit Hole.”<BR/>Calling a Spade a Spade.<BR/> I wish to acknowledge for myself, and hopefully without stretching the matter too far, and maybe for all of us, that we are on new, and never before seen, financial market territory. Yes “history” is important, but that “history” that is desperately being attempted to be applied to what’s happening now, I think, has to be acknowledged as being as old hat as monthly market village meetings in the Middle Ages. Why do I say this? Well let’s start out with a “$650 trillion derivative market”, and its “little cousin”, the “$45 trillion credit default swaps (CDS)”, and the fact that derivatives were only created in 1995 during the “every thing is now going up, and aren’t we the lucky ones” era of prosperity. I will be honest, and you’ve already probably figure this out, I had to go to Goggle re: Wikipedia re: “financial derivatives” last week, and left the page thinking that I had selected Portuguese rather than English as language. My only solace to this still not understood financial market, and I have no stomach to even try at the moment, has been statements like that reported by Ambrose Evans-Pritchard, International Business Editor for Telegraph.com as follows:<BR/> <BR/> "We are becoming increasingly concerned that the authorities in the world do not get it," said Bernard Connolly, global strategist at Banque AIG. "The extent of de-leveraging involves a wholesale destruction of credit. The risk is that the 'shadow banking system’ completely collapses,” [read derivatives] he said”.<BR/><BR/> Well gee wiz, if the “authorities in the world do not get it," who am I to complain? Except for the fact none of us probably “get it”, and someone, someday, very soon, should ring the class room bell, and give us a quick tutorial. And I sure don’t recall my (Circa 1962) business school “Money, Credit & Banking” class Prof., Admiral Challenger, ever mentioning a “shadow banking system”. (Talk about the “Middle Ages”?) <BR/><BR/> And then this morning Paul Krugmam, under the article title of “The Slap Face Theory”, a very good article about other matters at play in the “shadow bank system” (my appellation), says “Last month another market you’ve never heard of, the $300 billion market for auction-rate securities (don’t ask), suffered the equivalent of a bank run.”<BR/>I don’t want to add to much to this, and will let the “another market you’ve never heard of”, and the “(don’t ask)” speak for itself.<BR/> <BR/> This has been a rather protracted introduction to what I really want to say to all of you, as well as to myself. Everyone that I’ve read in the last week, including my own stuff to some extent, has been very gentlemanly and ladylike, in not wanting to appear to be alarmists, extremists, the sky is falling, the wolf is at the door, and hedge fund appearing salesman, fear mongers. This is an admirable way of being, indeed. Fear will not solve this problem even though it might be a useful motivator to a next, and hopefully more positive, course of action. Ambrose Evans-Pritchard, International Business Editor, for Telegragh.com, and author of multiple books, published a well thought out article titled “The Federal Reserve’s Rescue has Failed” a few days ago, and got hammered, and I mean really hammered, for what he had to say. He was also courageous, honest, and gutsy enough to end his article with this statement, “For the first time since this Greek tragedy began, I am now really frightened.” Isn’t it interesting that a clearly stated personal opinion, by a very knowledgeable guy, at the end, and separate from, the factual data of his article should draw so much heat? Clearly only a handful of us are ready to hear that the “emperor has no clothes” much less actually say it loud enough that anyone else can hear it. <BR/><BR/> And we have another “problem”. We’ve been brought up, if not traumatized, by our educational system, to think that we have to “know” all of the facts on all things before we can speak on any given matter. Well we don’t, and I think it is fair to say at this point that nobody else does. So what are we waiting for? And to be squeaky clean this is not a decision that anyone should allow anyone else to talk them into. Sorry to say, you’ve got to reach the plateau all on your own. What I’m trying to say might be easily communicated by the old saying “If it looks like a duck, if walks like a duck, and it quacks like a duck, then it must be a duck.” Folks, I think we have a genuine, honest to god, no fooling “duck” on our hands. Think about it.<BR/><BR/> So you might ask, “So what are you going to do about it mister smarty pants?”<BR/>We’ll I’ll tell you what I’m going to do about it by saying the following:<BR/><BR/><BR/><BR/>“Our Nation, meaning our very way being and living, is in near term Peril, period.”<BR/>(Webster: Peril, 1: exposure to risk of being injured, destroyed, or lost.)<BR/>Earl L. Crockett, March 11, 2008<BR/><BR/> <BR/> And what to do, you then ask? Bernanke is the one to call the “meeting”, a meeting declared to be an inquiry into, and about, real “outside of the box” thinking and solutions. My preference would be that the”meeting” be held in the dark of night, in the basement of the Fed, sans politicians, with no public notice, and having a well stocked bar, as they will surely need it. My first call would be to Milton Friedman, but he’s not around any more. I would also add such industry types as Buffet, Gates, and Jobs along with the “Friedman’s”. Buffet because he is the most honest, no nonsense, knowledgably, business nurturing, human being known to me with the possible exception of my now deceased business mentor George Quist. Gates because he and Buffet are the two richest men in the world, and therefore have the most at stake financially. And Jobs because he is the most creative “outside of the box” thinker, designer, and implementer of ideas, and technology, on the Planet. You probably have your own ideas about who should attend. I think it would be a very interesting conversation to pursue. So…is this an”outside of the box”, presumptuous, and even strange idea? Of course it is, but desperate measures for desperate times. And as much as I dislike the word desperate, my dad would have said its’ time to call “a spade a spade”. Warm up your G-5’s boys and girls your country needs you.<BR/><BR/>Earl L. CrockettAnonymousnoreply@blogger.com