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Liquidity or Solvency? 22-Mar-08 07:04 PM

Are Central Banks waking up to the fact that the liquidity crisis is only the symptom of the core solvency problem with banks? Is it right that they should bale out poor lending banks with taxpayers money? Of course CBs will claim they are only buying high quality loans but it's the dross that needs to be cleared. Shouldn't the market take its pound of flesh? Isn't that the only way to clear the bad debt?

http://www.ft.com/cms/s/0/a233faa2-f789-...

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Re: Liquidity or Solvency? 22-Mar-08 07:24 PM

This article might be of interest to you: http://www.financialsense.com/fsu/editor...

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Re: Liquidity or Solvency? 25-Mar-08 04:24 AM

Fed is doing the right and the wrong thing. Bailout a failing bank is right to avoid a qick meltdown of the banking system.

It is wrong to send a misleading signal to the market that the Fed is able to bailout all failing financial institutions.

Funny enough, JPMorgan itself has 7 trillion derivatives in hand. It is holding the largest bomb in the world, and it is encouraged by the Fed to pick up another bomb.

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Re: Liquidity or Solvency? 26-Mar-08 12:11 PM

jpm has about $70 trillion in deriv.

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Re: Liquidity or Solvency? 26-Mar-08 03:12 PM

$70 trillion? So large? Total valule of all derivatives in the world was $512 trillion according to latest BIS statistics. Are you kidding.

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Re: Liquidity or Solvency? 25-Mar-08 02:40 PM

You make a good point. My guess is that liquidity and solvency issues went hand-in-hand. Solvency is a long-term problem based on a decade of short-sighted greed in the investment markets. Liquidity is a short-term problem. By pumping money into the system and by (almost) promising to take debt as collateral, the central banks seem close to fixing the liquidity problem -- which has led Wall Street (and to a lesser extent the City) to an irrationally exuberant relief rally. Premature, I feel, as the solvency problems remain, and will -- as you say -- only be cleaned up when a bunch more investment banks and hedge-funds have paid the price of their stupidity.

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Re: Liquidity or Solvency? 25-Mar-08 03:26 PM

you forgot the important point....money did not evoparate...it is still in the banks....and fed gave even more money to the banks....the owners of the money are different know.....they are the most stingy people...the new owners ı mean....the money flows now...when it flows...some banks can not find the liqudity to adjust...

they will fall....they deseve to fall....some other guys will buy them...

to do that...they are gona sell stocks to folks that are greedy....cosequently....fotsie giril will dance at 6000....

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Re: Liquidity or Solvency? 26-Mar-08 08:36 AM

I disagree. A lot of money HAS "evaporated". When banks make or buy bad loans, they take a write-off. This reduces their capital. Then, thanks to the fractional reserve system, it reduces their ability to lend by a factor of about 12.

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Re: Liquidity or Solvency? 26-Mar-08 08:48 PM

"fotsie giril will dance at 6000"

hi mark

I thought the naughty girl was supposed to have danced her way down to 5000 this month? I had my cash all ready and waiting but no cigar :-(

Well I aint piling into more shares at 6000, she can go whistle. I'll spend it on other girls instead....

P12 sliding the hatch back over the top of the bunker.

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Re: Liquidity or Solvency? 26-Mar-08 08:41 PM

Hi james

"Premature, I feel, as the solvency problems remain"

I agree it's a solvency issue, hence the 'panic'. Fed's hoping that providing liquidity will buy time for the banks to rebuild their capital through normal business, facilitated by a widening of their spreads through ultra-low borrowing but maintained lending rates.

A conspiracy theorist would be claiming this stinks of bank bail-out at the expense of tax-payers. Of course i couldn't possibly comment ;-)

P12

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Re: Liquidity or Solvency? 26-Mar-08 10:23 PM

hi piqoud...

i meant daksi girl at 6000....ı am sory...ı wrote a maonth ago that footsie babe will dance on the table at the end of march....

she will be so charming that...neither you nor me can not resist to join her....

you know...ı did it at 5500 too...

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Re: Liquidity or Solvency? 26-Mar-08 10:25 PM

so piqoud...

see you at the table at 5000...

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Re: Liquidity or Solvency? 26-Mar-08 10:31 PM

look very carefully at euro-dolar....

when it hits the 1.60...

the footsie babe and the daksi girl will dance together to go south where it is hot...where you and me in hiding with all our guns loaded....

dont miss this randevue piqoud....

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Re: Liquidity or Solvency? 26-Mar-08 10:57 PM

dear james...

money is more than yesterday now...fed is pumping new money everyday...day and night to the banks....

the owners of the money are different now...it pass to smart people...

the question to you....

if america is deeply in trouble....

then why american stocks are only 10 percent down...look at footsie and daksi girls...they down almost 20 percent....cihna 30 percent...v.s...

and what is cooking on the oven is not omletts....it is hamburgers....

the american enterprise traveled the all emerging markets....started five years ago...including england too...

they gave 1 dolar...they took 1 euro...did make money in dax...now they sell dax 5 times above they bougt it....they get their euros back...

be carefull now....

they give 1 euro....they take 1.60 dolar...

so...look at the profit now...

in one year...

1 dolar=1 euro....

this is called...the flow of american enterprise....it is desinged...it is observed and controlled by WASP.

if you know all of these...you can make a lot of money....

this is life...it works this way...adopt it and be rich...

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Re: Liquidity or Solvency? 27-Mar-08 08:27 AM

Agreed that US markets have not faller far, as measured in dollars; but if you add in the devaluation of the dollar -- thanks to the Fed's dramatic easing -- then they don't look so hot.
As I see it, one of the key questions right now is as follows: does the cheap dollar encourage overseas buyers (especially China, India, sovereign wealth funds) to keep propping up the US deficits; or does there come a time when they see US-dollar currency risk as unacceptably high?
If the second scenario should play itself out, there will be an enormously painful adjustment, and sub-prime will seem trivial by comparison.

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Re: Liquidity or Solvency? 27-Mar-08 08:48 AM

For sure, 5000 would have my chips. But it will have to be soon for Brazil beckons where the rivers flow with ethanol, coffee and oil. I would not buy America - if you buy a currency you buy a country and that country has the best years behind her. They sure can spend but what can they make except more dollars? Maybe I will buy a piece of Germany...ah, so many choices when the chips are in your pocket but so few once they have been spent....

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Re: Liquidity or Solvency? 27-Mar-08 06:05 PM

Hi DB64
You are soooooo right.

Bank customer: "What's the difference between a recession and a depression?"

Bank manager: "In a recession, you lose your job. In a depression, I lose mine."

Is DB64 Jeff Randall of the Telegraph? see same thoughts in article on the subject in yesterdays Telegraph
http://www.telegraph.co.uk/money/main.jh...

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Re: Liquidity or Solvency? 27-Mar-08 06:57 PM

webbs3,

I thank you for the joke but ffs Jeff R is old enough to be my father, well significantly older brother perhaps.

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Re: Liquidity or Solvency? 8-Jun-08 11:25 AM

Mat I just make a point about derivatives. They arn't all bad, admitadly some have been devastating just recently but that is derivatives linked to the housing market mainly whilst many others have shown themselves to be a brilliant way to protect yourself against risk.

The question shouldn't be how much cash JP Morgan has in derivatives but how much cash JP Morgan has in trashy derivatives.

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Re: Liquidity or Solvency? 9-Jun-08 06:31 PM

The paradox of the NR situation is that the B of E / treasury is on the wrong end of an adverse selection problem. ie as the loan book unwinds oiver time the good debts clear off somewhere else (Lloyds TSB is the latest to go looking) leaving only the bad ones.

The whole point of a loan book is that you get a mix of good and bad and hopefully the former outweighs the latter.

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Somerset

Re: Liquidity or Solvency? 9-Jun-08 06:49 PM

Indeed Alan,

It's one of the reasons I've previously said that there may not be a shining pearl at the end of govt ownership. They could well be left with the dross.

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