Bloody Sunday at Wall Street
It was another bloody Sunday just passed, or black Monday if you ran out of blood at Sunday, that brought the US and world financial markets in really deep deep shit. One would expect that the big bosses at Wall Street, with an army of financial experts, tons of Ph.D theories and algorithms, and unlimited amount of computing power at their disposure, would know how to manage and mitigate financial risk. It turns out that all that they did to mitigate risk was to pass the risk on to their peer institutions and business enemies. Then when some of them fall down because of very very bad lending habits and total absence of diligence in lending practice, the whole sector is taken down in a row and investors from local and abroad are sucked into this financial black hole!
UK’s Northern Rock was the first major victim last year, then Countrywide Financial, then Bear Sterns and IndyMac, then last week Freddy Mac and Fannie Mae, now Lehman Brother and Merrill Lynch. AIG and Washington Mutual are rumored to be the next ones. After this domino effect of bailing out and bankruptcies, I wonder how many financial institutions remain alive as the pillar of american financial infrastructure after this crisis recovers? How many financial management text books will have to be rewritten? How many economic theories will be ridiculized? And most importantly how many years should Alan Greenspan be sent to the core of a volcano to redeem for his suicidal monetary policy during his two decades of tenure as chairman of the US Federal Reserves? Thanks to his money printing machine at the Fed, everyone at North America seemed richer during the past two decades but in reality felt poorer and poorer with money value depreciation and price inflation.
No one has the power to stop the Dollar printing machine at the Fed, but at this rate for another decade, the one dollar bill’s value be worth less than the cost of that piece of paper plus the ink on it, like a 1c coin’s buying power is less than the cost to make that coin. And because of this credit crisis, my gold stock is now worth less than half of its value at the beginning of the year! Thanks Alan! Wish you a good time in Hell.
The only positive outcome of this financial elephants going belly up is that oil price is finally getting down to a more reasonable price below 100$ a barrel.