With the DOW off over 500 points yesterday, Lehman in bankruptcy, the Fed rescuing A.I.G. tonight, the viability of WaMu and others institutions in doubt, Fannie and Freddie placed in conservatorship, a major money market fund halting redemptions, it might seem like the credit crisis is spiraling out of control.
And there are definitely more problems to come.
Many banks will fail - especially small and regional banks with excessive concentrations in construction & development (C&D) and commercial real estate (CRE) loans. And the recession is getting worse with rising unemployment, declining personal consumption expenditures, declining industrial production and falling business investment. Economies of many other countries are in or close to recession. The Fed even cautioned on slowing U.S. exports today for the first time.
Peacenik isn't an alarmist. But holy fuck we are in a crisis. The U.S. and world financial system is hanging by a thread and there is no plan. The timeline between assurances that a given institution is fine, to a hint that all is not well, to speculation about bailouts, to failure or a bailout, is astonishingly short...as in days. The destruction of capital and the transfer of wealth from the taxpayer to the wealthy continues unabated. Remember Argentina? That was a cakewalk. Remember the Bolshevik revolution. That was a minor burp. What do normal people do in a crisis that is large beyond a normal person's comprehension. Carry on as usual? What will you do? What will Peacenik do?
