John Aravosis summarizes reports from a variety of outlets to present the best picture I have seen on how the economic crisis is affecting various institutions in real terms. Here’s a sample from the Boston Globe:
In an example of how fragile credit markets have become, the state of Massachusetts yesterday tried to borrow $400 million to make its routine quarterly local aid payments to cities and towns. State treasury officials said the credit markets abruptly froze midday, leaving them $170 million short. The state will have to use its own funds to complete the local aid payments, draining the state’s balance to extremely low levels.
Check out the rest, it’s worth a read. And again, if you have similar links, please post them in the comments.
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I’d argue the MA situation would find a causal root in the bailout plan’s appearance, not as a result of the crisis per se, and the self-inflicted panic during legislative negotiations.
Besides, if inter-bank loaning, and thus liquidity, was so scarce and difficult, why has the LIBOR been floating around three year lows until last week?
For a voice opposed to the plan, see here.
Essentially, yes, markets need liquidity, but bailing out imaginary derivatives will do little to address the main issue: the collapse of housing. Bailing out Wall St doesn’t begin to address sluggish sales, torpedoed home prices, and lagging employment in housing related industries.
Redhorse, thanks for the Time link, that’s a great take. On a related note, the NYT has an interesting article today on many members of the Black & Hispanic caucuses voting against the bailout for class reasons.
And I agree with your take on MA — I meant “economic crisis” in the broadest sense, including the panic and general reaction.
(edited to add)
Here’s the line of the day from a Daily Kos post:
“Naturally — when in doubt and you have a sucky plan, make it much, much worse in order to attract a few whining, petulant House Republicans who couldn’t find their asses with two hands and an ass-finding device.”
Dave
Thanks for the valuable post. One of the most frustrating factors regarding this crisis is the dearth of clear insight and information regarding even the very nature of the problem confronting us. One senses that the alleged experts involved are merely guessing.
This paragraph alone (below) gave me more insight into this mess than the rest of the articles I’ve read combined.
I shudder to think what would happen if my business’ costs doubled overnight.
I only hope I won’t need a loan anytime soon. I d don’t know what I would do if I had a real emergency and couldn’t pay my bills out of pocket. That’s the problem today- so many people are living one emergency away from being broke. Thanks again.
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o what is Libor?
Libor stands for the ‘London Interbank Offered Rate’ and is the rate of interest at which banks borrow from each other in the London market….
Twenty-four hours ago you could borrow dollars overnight at an interest rate of 2.57%. But since the US rejection, that figure has soared to 6.88%. That’s an astonishing rise and shows how worried people are in the credit markets. Other interbank rates have also jumped although the rises aren’t as high.
High interbank rates matter because they mean that some banks can’t get cash to lend on to businesses and ordinary people. If businesses can’t borrow, some will fold and the economy will head into serious trouble.