Bloodstar

This will sober you up a bit:

At 2 minutes and 20 seconds in the video below, Democratic Representative Kanjorski explains how the Federal Reserve told Congress members about a “tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars.” According to Kanjorski, this electronic transfer occurred over the period of an hour or two. And it gets worse. Kanjorski paraphrases the following disclosure by Bernanke and Paulson:

“On Thursday (Sept 18), at 11am the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there.”

“If they had not done that, their estimation is that by 2pm 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.”

“We are no better off today than we were 3 months ago because we have a decrease in the equity positions of banks because other assets are going sour by the moment.”

DailyKos has more information and Balloon Juice has some more information and thoughts about the issue.

What makes the words even scarier is that the US (and world) economy is just as vulnerable now as it was in September (if not more so). The Entire economic system has been so over leveraged that finding a way to draw down gracefully will take a balancing act the likes of which we haven’t seen before. I hate saying it in strident terms, but we’re effectively balancing a big ole rock above our head, and instead of using several poles to keep it stable, we’ve been reduced to one pole that is trying to keep the rock from falling on our heads. oh, and we’re trying to run while keeping the rock over our head.

Or, more apt: I feel like Wile E. Coyote who just discovered that he ran out off the edge of the cliff and is suspended in mid air.

Tags: Economics, Financial, Political, bloodstar // 1 Comment »