This six-minute clip with the Chair of the House Capital Markets Subcommittee includes an account of how $550 billion in money market funds were withdrawn in an hour, with the expectation a further $5 trillion fleeing by 2pm – leading to the collapse of the financial system and the global ecoomy by the next day if nothing had been done. Worth a listen.


On the subject of his press conference . . . John Kasley: “I lavished in complete declarative sentences with nouns and verbs, subjects and predicates washing over me. Whole paragraphs with consistent subject matter just formed and became waves lapping at the shores of our minds. In a country that was founded on an idea, we have a leader who understands ideas. This is a class act. It’s a pleasure to admire the President of the United states again.”


The big picture is that there is now an extraordinary team at Treasury, the Fed, the FDIC, in the White House, and in central banks around the world, all pretty much focused on averting catastrophe, and with extraordinary tools to do it. I think they will succeed. Not to say things will be booming any time soon; just to say the world will not end.


I think we must just come to accept that the years ahead may be rather like the Seventies, when the economic chickens were coming home to roost in consequence of the guns-and-butter policies of Vietnam matched with the War on Poverty* . . . only worse, because back then the National Debt was less than half what it is now in proportion to our economy; and the financial markets, while depressed, were plodding along pretty much as usual.

So this will be worse . . . but, then again, better, too, because no matter what, most of us will have, in this next decade, things virtually no one in the Seventies had. Cell phones! Computers! Google! Twice as many “classics” to choose from on 50 times as many channels! Viagra! Audible.com! Skype! Air bags! DVRs! And even without these things (and those soon to come), there was a good bit of happiness to be found during the economic malaise of the Seventies (disco!), as there even was in the Thirties (jitterbug!), should it get that bad (but it likely won’t).

Safe-ish investments include the afore-suggested recently-issued TIPS (to foil deflation, if we have it, because you can find some selling for less than the $1,000 per bond at which they’ll be redeemed; and to foil inflation, if we have it, because they are at least largely inflation-adjusted) . . . and perhaps even a little gold and silver (through electronically traded funds with the symbols GLD and SLV).

There are now, or eventually will be, spectacular investment opportunities, if you can truly afford the risk (GLDD anyone?), but we will only know what they are and when it would have been smart to buy them after the fact. (This is why clairvoyance holds such appeal.)

My own guess – which is obviously nothing more than that – is that we may test the 6,500 level on the Dow, in which Alan Greenspan 12 years ago saw “irrational exuberance.” There would be a certain symmetry, or at least cruel financial poetry, in that once-scary high (through which the Dow just continued to rocket) becoming this year’s scary low.

*This time it’s been Iraq and the War To Improve the Lot of the Wealthy.


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