Why Gordon Brown’s Rescue Package Is Not Going To Work
GORDON Brown has got it wrong and the banking system remains inherently f*cked:
Despite all the gushing in the media, the drooling about “saviour” Brown (or not, depending on what you read), this “rescue” package is not going to work. It is addressing the symptoms of the problem, not the disease itself.
What to do?
This is very much like old-fashioned doctoring, before the days of antibiotics, when you tried to cool the fevered patient, in the hope that it would break, and the natural healing process would take over. Sometimes it did work, but most often the patient died.
We’re doomed!
Here, the infective agent is so powerful that hosing down the “patient” with money is only going to buy time – and very little at that.
The signs of impending disaster are there. John M. Berry in Bloomberg tells it as it is.
“The world’s banking system is caught in a vicious trap, with a forced sale of assets at one institution wiping out capital at others holding similar assets,” he writes. “Think of it as extraordinarily high reverse leverage.”
And, after considering the options, he comes down on the side of blaming “mark to market” accounting. It’s way past time to suspend it, he adds, “or somehow to make investors and analysts understand that fire-sale transactions aren’t supposed to be having such broad implications.”
Mark to market – sell it for what you can get. And if can get sod all because the market is shafted, then you must still try to sell it to pay off your debts…
Posted: 14th, October 2008 | In: Reviews Comments (11) | TrackBack | Permalink
