Stock Markets Bombing!

Generali

Guy_Montag wrote: »

So, can we get together with some other moneysavers & borrow £2.5b, maybe buy Hawaii or something.

Too close to sea level with global warming. We should buy the Peak District (Buxton's nice from memory).

Or even better invest in Structured High Interest Taxables like many banks and hedge funds seem to have done.

Alan_M_2

Generali wrote: »

It's not quite as simple as that IMHO. I posted the below on another website (The Fool):



In the case of your business, I guess a better analogy would be the VATman allowing you to pay your VAT late because one of your big clients had gone bust leaving you in a bad way temporarily. Your business is still sound but you have a cashflow problem. The VATman is temporarily easing things, not letting you off.

Splendid, that was just the kind of description I understand, I wish the experts would relay it in this language on the evening news, it would make much more sense to those of us that aren't in the know, but would like to know.

Alan_M_2

So fundamentally, the ECB cash injection (liquidity) is an overdraft to solve a short term cashflow problem......

The problem I see with that (and from your comments above) is, is the problem just short term cashflow? Or is the liquidity injection just the little boy putting his finger in the hole in the dyke?

So the money markets is really where the banks make their money? These are the short term loans of vast (national Debt size) sums of money at what appear to be credit card interest rates.

Interesting thread thanks to Generali, I've always viewed a lot of what goes on in The City with interest but never quite fully understanding it. I'm quite sure they disguise the simplest of transactions with funny names to make it all seem far more complicated and elitist than it actually is.

Call me cynical:)

Generali

Alan_M wrote: »

Splendid, that was just the kind of description I understand, I wish the experts would relay it in this language on the evening news, it would make much more sense to those of us that aren't in the know, but would like to know.

Evan Davies is pretty good IMO. The rest either dazzle you with jargon or oversimplify.

Worst of all are the 'autocuties' that don't have a clue what they're on about. I used to know a bloke that wrote about theological issues for one of the broadsheets. He used to moonlight on business and economics stuff. He was the first to admit that he was winging it. Made a decent bit of extra cash writing this stuff though because the editors didn't know either!

Twopints

Generali wrote: »

Too close to sea level with global warming. We should buy the Peak District (Buxton's nice from memory).

Or even better invest in Structured High Interest Taxables like many banks and hedge funds seem to have done.

:eek:

Structured High Interest Taxables - get out of property and into the S.H.I.T.

buglawton

Back to the U.S. financial situation for a moment, you might enjoy this cartoon:

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=8717275&story_id=9622531

dolce_vita

Generali wrote: »

Or even better invest in Structured High Interest Taxables like many banks and hedge funds seem to have done.

S.H.I.T.

Did you think that one up yourself Gen?

Generali

Alan_M wrote: »

So fundamentally, the ECB cash injection (liquidity) is an overdraft to solve a short term cashflow problem......

In this case yes, or kinda at least. The problem is really about trust. The banks don't trust that the other banks are still really solvent so won't lend to cover overnight cash shortfalls.

Alan_M wrote: »

The problem I see with that (and from your comments above) is, is the problem just short term cashflow? Or is the liquidity injection just the little boy putting his finger in the hole in the dyke?

Nobody knows. Perhaps the system is fundamentally broken. Perhaps this is just all an overreaction. It's not going to be possible to know until we know the size of these losses and where they are. That's the scary bit in many ways. This could go on for months or even years. Businesses won't be able to borrow much, nor will consumers. The economy underperforms for years because the banking system can't finance it.

Alan_M wrote: »

So the money markets is really where the banks make their money? These are the short term loans of vast (national Debt size) sums of money at what appear to be credit card interest rates.?

It where they fund themselves, to some extent at least. Due to the way money moves between accounts through the bank system, some banks will be short a few (hundred million or billion) quid overnight sometime. Others will have a few million more than they need. The long lend to the short at LIBOR (London InterBank Offer Rate). You can see what this is on ft.com and many other websites. It's normally at or about at the base rate for technical reasons.

Alan_M wrote: »

I've always viewed a lot of what goes on in The City with interest but never quite fully understanding it. I'm quite sure they disguise the simplest of transactions with funny names to make it all seem far more complicated and elitist than it actually is.

All professions are a conspiracy against the laity - Shaw

Alan_M wrote: »

Call me cynical:)

Cynic

dolce_vita wrote: »

S.H.I.T.

Did you think that one up yourself Gen?

No. Google 'Colostomy bags credit' for the whole thing.

Melissa177

dolce_vita wrote: »

S.H.I.T.

Did you think that one up yourself Gen?

I think that one is doing the rounds in the City!

mystic_trev

What's the word from our folks in the City?