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Maybe we didn’t come that close to complete economic collapse

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  • Thu, Feb 12, 2009 - 01:58am

    #1

    SkylightMT

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    Maybe we didn’t come that close to complete economic collapse

As most of us have already heard:

On C-Span, Rep. Paul Kanjorski (D-PA) explained how the Federal Reserve told members of Congress about an electronic run on the banks "to the tune of $550 billion dollars" within "an hour or two" last fall.

According to Kanjorski, on September 18, 2008 the Fed tried to "stem the tide" by pumping money into the financial system but it didn’t work and decided instead to announce an immediate increase in deposit insurance to $250,000 per account to stop the panic.

Said Kanjorski: "If they had not done that, their estimation is that by 2 p.m. that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it."

But further looking at the specific money market he was talking about:

http://www.foxbusiness.com/story/markets/industries/finance/money-market-breaks-buck-freees-redemptions/

Yes, the fund did "break the buck."

But the withdrawals only amounted to 40 billion, not 550 billion.

The Fed did not freeze the account, as Kanjorksi implied. What actually happened was that the money market fund manager announced:

"Effective today and until further notice, the proceeds of redemptions from The Primary Fund will not be transmitted to the redeeming investor for a period of up to seven calendar days after the redemption," The Reserve said in a prepared statement.

Here’s another source: http://www.portfolio.com/views/blogs/market-movers/2009/02/11/kanjorski-and-the-money-market-funds-the-facts

I really believed Kanjorski when the run was made public by him two weeks ago. It seemed to explain the frantic actions of Bush and Paulson back then, including Bush making threats of declaring martial law if TARP wasn’t passed.  But unless its some other fund his information seems to have been based on rumors and panic, not facts. I feel rather embarrassed for having shared the Kanjorski interview with my friends and employees 🙁

  • Thu, Feb 12, 2009 - 02:38am

    #2
    Peak Prosperity Admin

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    Re: Maybe we didn’t come that close to complete economic …

Thanks for the post. With all the dither and noise these days, it is often difficult to keep up with everything and know who to believe. I initially took the Kanjorski interview at face value, as I felt in my gut that something more had gone on than what was being reported, and still do. I still wonder if the run on the banks in the UK was real and the US stepped in to intervene by providing capitol, and that was the real story. Did the US send billions to the UK to stop a collapse?

Thanks again for the post.

Rog

  • Thu, Feb 12, 2009 - 02:38am

    #3
    Peak Prosperity Admin

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    Re: Maybe we didn’t come that close to complete economic …

I shared the info with others, as well.  I don’t know what, or whom, to believe anymore.

  • Thu, Feb 12, 2009 - 04:18am

    #4
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    Re: Maybe we didn’t come that close to complete economic …

 

Don’t get up and leave the theatre just yet.

 The movie’s not over.

 – that "steep climb" and all the hardship that Obama claims we have to work through…. hasn’t started yet.

  • Thu, Feb 12, 2009 - 05:46am

    #5
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    Re: Maybe we didn’t come that close to complete economic …

It all comes down to who you believe.

Shall we believe the various "data providers"?

As soon as I saw this video I knew the there’s-nothing-wrong-at-all-you-pessimistic-crank crowd would be all over this story attempting to discredit Kanjorski.

Truth is, it’s a moot point. It’s not like the legitimacy (if you want to look at it that way) of the financial crisis hinges on this story. Yet it’s amusing to see people frame it that way.  

 

  • Thu, Feb 12, 2009 - 05:46am

    #6
    Peak Prosperity Admin

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    Re: Maybe we didn’t come that close to complete economic …

It all comes down to who you believe.

Shall we believe the various "data providers"?

As soon as I saw this video I knew the there’s-nothing-wrong-at-all-you-pessimistic-crank crowd would be all over this story attempting to discredit Kanjorski.

Truth is, it’s a moot point. It’s not like the legitimacy (if you want to look at it that way) of the financial crisis hinges on this story. Yet it’s amusing to see people frame it that way.  

 

  • Thu, Feb 12, 2009 - 07:26am

    #7
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    Re: Maybe we didn’t come that close to complete economic …

Confidence is not the cause of the economy functioning poorly.  Confidence is the effect that comes from it performing poorly.  Any politician blaming you for lack of confidence is a con man.

I can be as positive as I want. It won’t change the fact there are 12 million houses overbuilt on the market and prices are still too high.  It won’t change that millions of people live in houses that they can’t afford to pay the mortgage on, while simultaneously having thousands of dollars of credit card debt.  Confidence also won’t change the fact that many businesses that were created as a result of a housing bubble can and will not be profitable in the future because housing will be in a depression for the next few years.  These companies have to liquidate and Obama can’t change that.  The same can be said for the Automakers and several other sectors.

 

  • Thu, Feb 12, 2009 - 04:58pm

    #8
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    Re: Maybe we didn’t come that close to complete economic …

SkylightMT – Don’t feel embarrassed that you shared the Kanjorski video, why shouldn’t we believe our politicians when they are going on record telling us the intricacies of their decision making – it is his failure not yours. 

I’m glad you mentioned that video as there is something else very troubling about it:

http://www.youtube.com/watch?v=INAGMSARPYw&eurl=http://www.dailykos.com/storyonly/2009/2/9/234340/6189/142/695504

Paul Kanjorski (D) (PA-11)  – Note approximately 5:45 into the video

Ya know, we’re not any geniuses in economics or finances… We’re
representatives of people. We ought to take our time, but let the
people know this is a very difficult struggle.

Somebody threw us into the middle of the Atlantic Ocean without a
life raft and we’re trying to determine what’s the closest shore and
whether there’s any chance in the world to swim that far. We. Don’t.
Know.

I don’t know about you, but I think this is scary, an admission that they are overwhelmed and clueless.  The bigger issue is that our economy and the verry issuance of our money – has been delegated to private banks – with the Non-federal Reserve bank at the center of the octopus.  The criminal Non-federal Reserve banks have ginned up our economic system like a flashy Vegas casino – it is far too complicated and rife with fraud.

The Constitution stipulates that ONLY Congress may issue our nations debt and currency but since they haven’t done that since 1913, they are now clueless to help in any relevant way – truly overwhelmed.

They cannot even figure out that most of our banks are insolvent – and even if they did, what can they do about it?  One can only hope that as the people continue to suffer, maybe they will wake up and fire the fed. 

Larry 

 

  • Thu, Feb 12, 2009 - 06:35pm

    #9
    Peak Prosperity Admin

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    Re: Maybe we didn’t come that close to complete economic …

What’s crazy is the people that created the sunami and didn’t see it coming are now the ones trying to fix it. 

When you fix a car the thing most amatures do is just replace the broken part.  Say the car overheats and it blows the cylinder head gasket.  Most just replace the gasket, but then it blows again.  The problem is the water pump is broken or the thermostat is stuck closed.  No point in replacing head gaskets as long as the problem isn’t fixed.

These experts will bankrupt us before they fix it. 

  • Thu, Feb 12, 2009 - 06:44pm

    #10
    Peak Prosperity Admin

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    Re: Maybe we didn’t come that close to complete economic …

So if the banks collapsed it would end life on earth as we know it?  The world economy would collapse?  Maybe the US economy that relies on billions borrowed daily, but not the world.

It’s not like an asteroid hitting earth.  The factories are still there.  Producing countries can still make stuff that people want.  People still need to eat and since we are alive there will be demand.

Like Peter Schiff says, the world economy is like a train. Everyone thinks that America is the engine when really it is the caboose.  China and other producing countries are the engine of production and loaning us money so we can consume the wealth they create.  They need to unhitch the caboose. 

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