> -----Original Message----- > From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On > Behalf Of John Williams > Sent: Tuesday, September 23, 2008 3:40 PM > To: Killer Bs (David Brin et al) Discussion > Subject: Re: Meltdown > > Dan M <[EMAIL PROTECTED]> > > > > The problem was that no-one (including the board of directors of AIG > knew > > that AIG was insolvent until the day the government intervened. > > LOL! Do you believe in the tooth fairy, too? > > > At that point, _everything_ becomes questionable. GE having to pay > nearly > > double for a 1 day note is an example of this. > > Oh, the horrors!
No, rather "Oh, the irrationality." Why would people be reluctant to by one day notes from GE. Does any sane person think GE will go belly up _tomorrow?_ That's what the interest rate measures...the willingness of folks to buy GE notes. All of a sudden, buyers dried up. That's a measure of the panic. A rational market wouldn't change GE's interest rate that quickly because companies with idiots as managers (e.g. AIG) went belly up and had to sell most of their equity to the government at a discount or go bankrupt. BTW, in saying this, I'm arguing that there is a problem that is not inherently related to the government, but originated with market players who build bubbles and panic, even though folks like Greenspan said and says both are foolish....which they are. In a sense, the problem is not that there is a housing bubble in some areas of the country. It's the timing of the market response, and the irrational extension of it. Let me give an example. I live in a neighborhood near a city that has been growing like gangbusters: Houston. Our housing prices have always been low compared to the US. In one of the prime suburbs, a fancy house goes for $100 sq/foot. My house, including upgrades to its basic value (e.g. wood floors and granite counter tops) will probably sell for about 60% more than I bought it for 16 years ago. That's 3% per year, and I've upgraded the value of the house. That's not a bubble, that's barely keeping up with inflation. And we're in one of the top 10 growing counties in the nation. And our prices are very low, even compared with cities like Milwaukee. Nonetheless, our market is affected, even though our potential buyers are not the sub-prime folks. Banks are nervous about loans to well qualified buyers. This is a personal example of the irrationality of the market that I'm talking about. Out of curiosity, have you any experience or any friends who are connected to investment banking, have contact with CEOs of large corporations, etc.? You know my background, what's yours? Dan M. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
