DOW at 9,258

[Lancer]

What does that mean? I take it alot of people sold stocks and put that money elsewhere. That means that anyone with money still in would have lost considerably by staying in. However everyone that now has money out from selling will eventually buy again because its really the only game in town for that kind of money, yes? When they do that the stocks values will rise once more, yes?

If no, please explain, thanks.

[Spaced Cowboy]

I think we are still on the way down...maybe 7k...maybe 6k will be the bottom.

[Guynemer]

I'm not worried until I see stockbrokers jumping off rooftops.

[Lancer]

Just walk in the street for a while.

But again, what does it mean? The $ has to go somewhere, right? So it goes back into the market, that goes back up and everyone is happy and can pay their mortgage, yes?

[Kidlicious]

Originally posted by Lancer
Just walk in the street for a while.

But again, what does it mean? The $ has to go somewhere, right? So it goes back into the market, that goes back up and everyone is happy and can pay their mortgage, yes?

There was the same amount of cash as there was before. Now there is less wealth.

[Lancer]

[Japher]

Naw, the wealth is still there. It's just not liquid.

whatever that means

[Kidlicious]

That wasn't a joke.

[Lancer]

That's just it Japher, wtf is going on?

[Kidlicious]

Gas prices are looking better though.

[EPW]

Too bad no one will have a car

[Japher]

Here's how I get it:

Banks borrow money from the government at an interest called the discount rate, and they borrow at an amount based on their total assets (deposits and other holdings). Banks then lend this money to business and consumers at such an amount that they end up being only fractionally liquid, meaning they only have so much cash on hand the rest is invested. Thus, in order to pay for those who want cash they tend to borrow amongst each other to help cover these liquidity issues. These short term, over night loans, are charged at a rate called the federal fund rate and this rate is generally marginally higher than the discount rate. Well, the federal fund rate is now less than the discount rate but real interest is still really high. This indicates that banks are too scared to lend money to one another, even for a day. These scares are brought about because of increased national debt, the housing bubble busting, and a drastic decrease in banking assets because of this (thus they are borrowing more than the are worth). Investments have therefore stopped and everyone is pulling money into savings (more liquid).

The Fed and Gov have done everything that they really can short of unprecedented action. Allowing the banks to borrow more money or encouraging spending by lowering interest rates (federal fund rate) does nothing if no one wants to lend money besides an already broke government. The money has to flow and it's not because no one sees any reason to spend money right now, apart from Buffet. And, he may be the smartest guy on the planet... or the dumbest, because GE is going down.

Government needs to seize control of the banks until this blows over.

[Japher]

If you understood Dune and why the spice had to flow than you really should understand this crisis.

[Boris Godunov]

I'm sure retirement is overrated, anyway.

[Lancer]

Spice needed to flow so that space travel could could continue..the big guild worm things. Don't recall why else, but I might have the book in the Phils where I'll have time to read up on the crisis, thanks.