Economy

I kid you not (and I wish I was kidding), a Bloomberg article used the word "spray" to describe last night’s emergency injection of ~$250 billion dollars ($180 billion of that from the Fed) by central banks into "the system" in an effort to provide some stability to the stock markets.

And I do mean ‘breaking.’

Gold is now up more than $50 on the December contract (futures), indicating that the direct monetization of debt as implied by the AIG deal is being interpreted by the markets as the potential beginning of the end for the dollar. The S&P 500 is down 35 points.

This is a very good article by John Markham of MSN Money about how we got here and the depth of the current crisis.  I strongly encourage you to read the whole thing.

For anybody who happens to think that a Money Market Fund is somehow the same as money in the bank, this one’s going to be a bit of a shocker.

This is an incredible turn of events.  This is the biggest news of the decade.

I was not expecting this sort of activity for another year or two yet.

The Federal Reserve has bought a majority stake in a private company in exchange for cash.  Where did the Fed get this cash?  It was created out of thin air.

This article addresses the questions posed by ready Phredd earlier in the comments section of the post below.

The question concerns the new Federal Reserve actions allowing equities
to be submitted to the Fed in exchange for cash, requiring the
"temporary" suspension of "Section 23A" of the Federal Reserve Act,
which forbids a depository institution from transferring funds (‘making
loans’) to its affiliates. 

What types of funds are we talking about?  Depositor accounts.  

AIG is down another 34% in the premarket.  Something wicked is brewing over there, despite the "lending pool" announced last night.

There are reports of AIG policy holders cashing in their policies while they still can.  The report I read was about people in Singapore doing this…either they are more on top of things over there, or we just don’t report on such stuff happening in the US, for whatever reason.

The final hour finished down big on high volume with the Dow off 504 points and the S&P 500 down 59.

A question of vital importance is whether the recent dollar rally is real or fake. If fake, it is an engineered outcome of central bank policy (US, EU and JP combined) and it will fail, possibly spectacularly.

Things are certainly progressing at a very fast pace.  I find it
inconceivable that Bank of America (BAC) would step up and buy Merrill
Lynch (ML) on such short notice.   ML is heavily exposed to the same
stuff as Lehman, and we know that today (Monday) is going to see some
heavy trading in the derivative markets as a result of the bankruptcy
filing by Lehman.