What is the financial problem? (mannfm11)

What is the financial problem?	mannfm11	NEW 12/16/2007 8:00:33 PM
AsI read more and more, it occurs to me that the game has been, Larry,Curley and Moe get together and start a money market fund. They get anaccount at a bank and a line of credit. They take in deposits and buyhigher yielding crap, cycling the money through the banks, but neverreally in it. Eventually, a $1 million line of credit at a bank ends upsupporting $100 million in deposits. LCM (Larry, Curley & Moe) findthemselves living high on the hog with plenty of tootsies runningaround so they get the idea to pump this game to $1 billion. They needassets so they go to Wall Street who comes up with a scheme to createsecurities to sell the LCM money market fund of highly rated quality. Therest of the financial world realizes that the game to be in is the LCMmoney market game. In fact, this game starts a bunch of games includinga LCM hedge fund as well. (interestingly LTCM and LCM are pretty close.I wonder who the T was in that group?). The entire world is new engagedin creating financial assets to feed this animal including the banks.Suddenly word gets out that a lot of this stuff is crap and everyonewith a brain reaches for their money. There is a run. It isn't thetypical run on the banks, but a run from all these assets which spreadsto the accounts that hold them. The explosion and the liquidy crisis weare looking at right now is that no one wants this crap, everyone wantstheir money and the system doesn't have room for both. The system isn'tliquid and hasn't been liquid because only banks can really createsomething you can put in your pocket and walk around with. All thesemoney market funds have to be cleared through the banks. The banks havebeen running their own money market accounts, but they have beenshooting craps to the point they blew a hole in the bowl. Thus it isnow leaking like a SIV and spilling out on others. Ispeculated this would happen several years ago when I first got here. Ididn't understand how the game worked and what was holding it together,as I figured we would be 5 years or more into a depression by now. Howmany slugs do they have in the fuse box. I'm sure one for everycircuit, the Thai circut, the China circut, the Korean circuit, theRussian Circuit, the Argentine circuit and 3 for the Europe circuit.The US circuit is going to take 25 and the wiring should totally burnup. I say we deflate unless the Fed blows the lid off thismess. I don't think they blow the lid off the mess because bankers justaren't the types to let the borrowers around the world off the hook.Banking ceases to be a business if they blow this thing up. Read thatagain: BANKING CEASES TO BE A BUSINESS. You guys betting onhyperinflation are betting on banking ceasing to be a business on avoluntary basis of the banking monopoly destroying it intentionally. Mybest guess is they let this outside the banking system financing gameimplode. It might take GMAC, Ford Motor Credit, FRE, FNM, CFC, theFederal Home Loan Bank, GE and God only knows what else with it. Thebanks will hold out long enough to get enough Federal paper to carry onwhile their competitors go to prison and go broke. They can't do thisif the central bankers destroy the very species they use to operateworldwide, the American Dollar. Going forward, what does theworld do when the group that consumes 30% of its manufactured goodscan't use their credit card or go out and ride their horsey? I thinkthey all have to walk off the job. I'm still of the opinion that cashis going to be king and gold will probably be on a relative basis,right with it. Anything the average Joe can't put on his credit card isgoing down the tubes and a lot of average Joes with it. Houses and carsare going to be extremely tough to finance. Credit cards are going toget tougher to get and the companies primarily involved with them aregoing broke. The USPS is going to also lose revenue as the 20 billioncredit card solicitations mailed every year are going to stop,depriving the service of $5 billion a year in revenue. The papercompanies are also going to lose a fortune from the drop in paperdemand for envelopes and printed matter in these solicitations. Thereis a story on this page about an Australian real estate concern havingproblems getting financing on American property, mostly retail. Howmuch retail do you think we really need in the US once the public can'tput it on their credit card? Maybe 30% of the current supply?Warehouses and malls just shut down. Maybe the company to own is CAT,as there would be a great business in tearing them down, ala shootingcows in the depression to prop up the prices. I know one moretime I am going to stir up the inflation argument, but I really don'tcare. Resources are going to prop up the solvency of the system, not toplease the bulls or to buy another SUV. They could really not give adamn about others, as long as the banks stay afloat.