This is the captain speaking! Everybody to the poop deck where the band has assembled. They would like to play for you a few songs. Apparently we have hit something. Maestro: Auld Lang Syne!
And What a voyage this has been.. Reminds me of the old road runner cartoons where he runs off the cliff but doesn’t drop until he looks down, and then he drops. The dow was down 5% right after the bell this morning in a good road runner impersonation. Meanwhile back in Reykjavik…………..
The Prime Minisher Geir Harde addressed the nation a few days ago and warned of national bankruptcy. Their on again off again purchase of the banks is definitely on. The biggest bank Kaupthing has been nationalized and the Chairman of Kaupthing Sigudur Einarsson(great names!) is really pissed. Yesterday he accused the government of ruining the country’s financial system. Now all three banks, Kaupthing, Glitnir and Landsbanki are owned by the guvment. I checked on some numbers. The liability of Iceland’s banks is $61 billion. There are about 310,000 Icelanders give or take a few blondes. Let’s do the math. $61 bil divided by 310,000 blondes is $196,774 owed by every man, woman and munchkin.Whoa!
One of the reasons I am so fascinated by Iceland’s story is that I happen to be reading Jared Diamond’s book “Collapse” in which he in very long winded fashion is writing about the fall of different world civilizations and he has been championing Iceland’s fascinating history of near collapse to top of the heap as measured by per capita income and “livability”,whatever that means.. The book was written in 2005. It’s a great story and I can’t wait for the DVD. In Reykjavik the blondes are crying in their cafe’ but over in another Celtic stronghold, tonyblairland, people are fuming. It seems that Kaupthing Bank had been paying high interest on savings accounts and a lot of brits had put their savings in these ICESAVE accounts including some local governments in England and Wales. http://www.moneyweek.com/personal-finance/which-bank-will-give-you-52-on-your-savings.aspx
As I write, a lot of these authorities are on their way to Reykjavik to kick some butt. And the ironies just keep rolling in. Iceland was one of the founding members of NATO and where have they been begging? Yup. Putinland. Old Black belt himself. I will continue to cover this compelling story because it’s on a scale I can understand, real Shakespearean tragicomedy.
Over on the continent The ECB has been firing up helicopters and Volvo front end loaders dumping Euros into banks, $50 Billion euros 2 days ago and $100 Billion yesterday. Nada.
And in bushville the Keytone Cops are still running around madly trying one so far futile solution after the other. The banks are all in free fall, Insurance got hit yesterday big time and with everybody lining up at the federal trough the deficit could hit $2 trillion by early next year or sooner. Some of those insurance companies have big medical insurance arms. What happens when the health insurance business starts to sink beneath the waves? MY son who works for Dell got a 150% premium increase yesterday from Blue Cross. Hmmmm….. I’m not an economist but the whole process seems so puzzling.It seems some companies have lots of cash on hand. They make payroll, buy what they need to keep afloat with no problem. Companies like Microsoft, Exxon, Wallmart. And others have to pay all their bills with the commercial paper market which as you know is “frozen.” No credit. So the guvment needs to unfreeze it. So it gives money from Bernanke’s Chinook helicopter to the banks and the commercial paper market and nothing happens. The bankers rush back to their Manhattan apartments and stuff it under the mattress. Now what? I think it might be a good time to bring back some of those nice 19 year old national guard troops from Iraq and march them up to Goldman Sachs and JP Morgan and point their laser sighted rifles at the bankers and say”Lend!”
But I have a wee little voice that is whispering in my ear which is saying…”Let see. All this lending and credit is what got us to this point in the first place. So the solution is more lending and more credit?….. How does that work? Isn’t that like going out to the poor junkie in the street who has been days without his fix and giving him a packet of white powder and saying “Here. Take this junk. You’ll feel a lot better.” As I say. I’m not an economist.
I see this morning that this market plunge is the biggest year to date drop in the history of the S&P. Bigger than the 1930’s, bigger than 1974 and 1987 and 2002. And the bobbleheads keep insisting that all this depression talk is nonsense. Even plump avuncular Alan Sloan of Fortune who I really like with his goofy crackly voice told Suzy Garob on Nightly Business Report that there was no chance of a depression. This is the same Suzy who has to ask every single guest if we are having a recession. Bobble bobble, gobble, gobble.