BERLUSCONI: LEADERS MAY CLOSE WORLD’S MARKETS
October 10th, 2008Via: Bloomberg:
Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world’s financial markets while they “rewrite the rules of international finance.”
“The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,” Berlusconi said today after a Cabinet meeting in Naples, Italy. A solution to the financial crisis “can’t just be for one country, or even just for Europe, but global.”
The Dow Jones Industrial Average fell as much 8.1 percent in early trading and pared most of those losses after Berlusconi’s remarks. The Dow was down 0.5 percent to 8540.52 at 10:10 in New York.
Group of Seven finance ministers and central bankers are meeting in Washington today, and will stay in town for the International Monetary Fund and World Bank meetings this weekend. European Union leaders may gather in Paris on Oct. 12, three days before a scheduled summit in Brussels, Berlusconi said today, while Group of Eight leaders may hold a meeting on the crisis “in coming days,” he said.
Berlusconi didn’t give any details about what kind of rules leaders were looking to change, except to say that leaders are “talking about a new Bretton Woods.”
The Bretton Woods Agreements were adopted to rebuild the international economic system after World War II in a hotel in Bretton Woods, New Hampshire. The aim of the agreements was to establish a monetary management system, initially by pegging currencies to gold. The IMF was set up later to help manage the international financial system.
This seems a classic response by our control-freak culture. If it don’t do what we want, shut it down.
Of course that would be a horrible idea. Look at the last time our US markets were shut down, during the week after 9/11. When they finally opened again people could sell fast enough. The DOW was down over 700pts the first day, and lost another 1,000pts over the next 3 or 4 days. Of course it recovered because the PPT came in balls to the wall, the FED hyper-inflated the economy, and ultimately people realized that the terrorist attacks were indeed an isolated event and the world wasn’t going to fall apart after all.
Of course now, hyper-inflation is the very reason things are going to hell. And actuall, yes, the world does indeed seem likely to fall apart. So a shut-down of the markets would only serve to create pent-up demand, desperation and further “anxiety” (did Bush really say “the markets are falling because of anxiety”?, sheesh, thanks for cluing us in on the esoteric workings of high-finance).
Of course, an indefinite shut-down WOULD allow a lot of these collapsing firms to begin re-jiggling their debt-portfolios “off the record”, so to speak. To begin cleaning house in a more orderly way, without those damn free-markets constantly trying to pass judgment on what their assets are really worth.
Ultimately, though, I would caution all you traders out there that you might want to take this as a possible shot over the bow. Personally, I think the idea that you can get rich on “virtual” securities while the real world is falling apart is a dangerous illusion. The reason I don’t have a single investment account anymore is that I’m convinced you can be just as right as rain in your positioning and still lose everything you have. And that’s because you don’t have direct control over your assets. Where’s your money if financial markets get closed indefinitely? Where’s your money if your investment firm gets closed indefinitely? What if the authorities decide short accounts should be frozen because of their lack of patriotism? Or just look at the gold futures story just below….physical gold is in high demand while the virtual-gold futures show dwindling support.
Years ago Soros made the famously insightful comment: “”Economic history is a never-ending series of episodes based on falsehood and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend, and step off before it is discredited”
What if what is being discredited right now is the idea of virtual assets altogether? Isn’t that what’s happening globally? At what point do you “step off”, cash out your investment winnings and take your assets in hand? In my personal experience most traders end up being “a day late and a dollar short” when it comes to taking money off the table. They get so caught up in playing the game well, they forget to win the game.
Of course, that might just be my inner cranky old-codger coming out. Listen to your own instincts…
I saw this in the cards last week. Looks as if I was one week too early:
http://canuckheadlines.com/2008/10/financial-911/
Berlusconi, thank you. You are just like Bush, you open your mouth and all that glitters goes down the toilet.
When the market crashed in 1987 I didn’t have two nickels to rub together. I watched my parents fight like mad dogs over whether to buy or not. I guess Dad won and he bought some energy stocks that well, I cashed out on several years ago.
In any case, I agree Lavagulin – and I do think we are in for a stock market holiday – maybe a bank holiday as well.
Moved some cash, withdrew some cash. I was giving myself some definite cardiac stress over whether to make a cash move, or not. Something decided for me. Meanwhile, the teller from whilst I took out the cash muttered very quietly to me, “is there a problem that you need to talk to someone here at the bank about?” I thought about it while I looked at a bank of cameras, and I said, “no, I don’t like the economy we’re living in right now, and I don’t think anyone here can do anything about it.” I didn’t want to say, girlfriend, your bank has a D+ rating in a report that was in front of Congress, and if you go down, I’m not standing in line, I’m taking an early out.
I rarely feel intimidated by personal interactions at this stage of my life, but I did today. The teller was making me sweat for it. The bank did not want to give me the money. No way. Took about half an hour to get the cash out.
Not even a “have a nice day” when I left.
Then went to another bank where I withdrew and deposited more money from the other bank. These people made me feel good about money. But then they were on the plus side of the ledger.
I don’t care if I made an ass out of myself by taking out a lot of cash. I’m tired of the flop sweat I’m seeing on Paulson (he looks like he might seize up and go into a seizure any minute now) and Bernanke and Bush and every other talking head, let alone the people I work with who are the same trap I am in.
The Markets and Banks can do no wrong seems to be the mantra. We’ll get it all back if we wait 30 years! I don’t want to wait thirty years thank you.
I won’t be surprised if we have a stock market holiday that extends past Monday, or a banking holiday that extends past that use by date either.
I dunno how to close this post except to say that I think the gig is up with the funny money.
Those of you in the U.S., I am convinced that these goons will close off the MAC machines for a day or two, or three. I really hope I’m wrong.
I have enough now for two months of Mom’s expenses, which is really all I am worried about.
It is hard to be a person with people who depend on you for their income, so I am doing what I am doing to protect them. I would like to think that a lot of other employers feel the same way.
Berlusconi, like Sarkozy, is another of those Gladio-era assets all grown-up and one of the Big Boys today, having successfully scaled the ranks while surviving the “small aircraft/failed brakes/heart attack” attrition process seemingly so common at the center of world politics.
Engdahl’s latest essay contains an interesting perspective on he factional aspect of what might just be going down across the Atlantic, though I have to wonder if it all isn’t just more smoke & mirrors to keep the eyes distracted while the real slip is made.
Behind the Panic:
Financial Warfare over Future of Global Bank Power
Damned url tags. I thought the board supported the url tags. Please forgive my error.
Here’s the full “messy” link:
http://www.engdahl.oilgeopolitics.net/Financial_Tsunami/Warfare_Behind_Panic/warfare_behind_panic.html
Eileen,
I’m very interested to hear stories about how banks handle large withdrawals. I know form myself that when my wife took a few thousand out of our savings account a little over a week ago, the teller asked her (discreetly) if it was because of the economy. She was taken off guard that they’d actually ask (obviously the bank has trained them to do so), and she hemmed and hawed and said “well, sort of, but you know it’s just always good to have a little cash on hand”.
Bank runs are getting very close, and indeed a small handful have been reported already. I think the banks must know it in their bones, even though most are just small- and mid-tier businesses that aren’t savvy enough yet to know it in their heads.
For those with money who want to avoid banks, short term treasuries can be held directly with the Fed through Treasury Direct accounts — it’s the most conservative way to go since if the Fed can’t pay you back then by that time there isn’t a single other bank that could either. In fact, so many people are now choosing this that short term treasuries have actually dipped once or twice to zero interest (even briefly negative interest). I think the irony in that, though, is that you’re basically loaning money (giving it really, at zero interest) to the Fed so they can help bail out the banks you didn’t trust your money with in the first place.
A nice Engdahl read — thanks for the link, Miraculix.
@ Lagavulin
Knowing that the tellers have been instructed to snoop for the last several years re large cash withdrawals, I’ve always blithely volunteered info about my fake “big purchases”: “I’m buying a used car and motorcycle for my son, and I’m getting a great discount for paying all cash, yadda yadda.” No delay, no more questions. I’ve instructed my family to do the same, and no hassles so far.
I’m very interested to hear stories about how banks handle large withdrawals.
3 weeks ago I was in the process of liquidating
remnants of an out of state bank account.
I deposited a 8k check into my savings here locally(SD).
I also withdrew 3k$ at that time in case
I found anything nice at a “fun” show
Only to be greeted with 2 questions :
1)Would I like a cashiers check?
(unreasonable dent in the local currency supply?)
2)Had I met the branch manager?
(Yes I had,..Fleetingly when he was required to OK my opening deposit because the bank drone couldn’t pull something up on my new state issued DL/ID/secret dossier.I had to sit there for an hour waiting as he yakked on and on catching up on things in his office,with I guess an old long lost friend who paid him a visit.Regardless I had nothing to say to him.Returning the favor of my dis-satisfaction with our previous encounter)