Ah...I see. I thought it was t-bill rates that you were on about. Now it's the Fed. It's been my experience over time that it's easy to read and internalize and repeat the prominent arguments that are in press. But it's hard to think independently and act accordingly. Sincere best of luck to you.
T-bill rates were an indication of a true run to safety around the time BSC failed. The Fed came in and saved the day. Are you thinking that the market wouldn't be significantly lower if the Fed didn't jump in and start cutting rates like crazy and open the discount window? How are you going to argue against that thinking? BTW, where did I mention t-bill rates in this thread before you asked about it?
Obviously the fed cant fail, but extra liquidity will have a severe impact on the instrument the fed employs - the dollar. There are several scenarios that can occur in the next 6 months and all of them will lead to negative impacts on the dollar. Subprime swaps blow up while on the feds balance sheet? Absorbed by the american tax payer. Fed prints another 10 trillion in paper to provide continued liquidity? More devaluation of the dollar. At the end of the day, if the Fed is going to use tax payer money to save banks that made bad bets, there is No Way that it will result in a good outcome for the american economy.
Mizuho just wrote off USD5Bn. The slience fro the Japanese banks was deafening. They are yield pigs and this is probably where much of the missing USD200b of writeoffs are to be found. Hedge Fund Ponzi schemes where they are keeping quiet in case people who want their money back but can't have it back try to redeem are another likely place. Fed bauilout of brokers was a backdoor provision of liquidity to hedge funds also IMO.
200bn? If that was the last of the writeoffs this economy would be fine. There are trillions of securities in all forms that have to be discounted back to PV to account for the fact that the J6P who was the collateral on those securities can no longer pay interest on any of them.
The significance of the increase in inventories seems to be being missed. Right at the time banks are short of cash corporates will draw down their credit lines to replace liquidity lost from failure to turn over their inventory. This may well be a cause of the LIBOR spikes - NOTE this inventory event and money market rate spike is something that usually PRECEDES a recession and is one of the early signs.
Newbie question- If there is a danger that some of the major banks could fail- Where exactly is a safe place to park your cash, under the mattress?