This is from yesterday and speaks (screams really) to the point made on Mr. Setser's blog. This is not a time for #@%$ing around and it is serious. Read Nouriel's piece here. The last paragraph is telling as to why I, with white knuckles, hold significant positions in gold miners. But if the system goes these paper stocks will go too. You know that.
The next step of this panic could become the mother of all bank runs, i.e. a run on the trillion dollar plus of the cross border short-term interbank liabilities of the US banking and financial system as foreign banks as starting to worry about the safety of their liquid exposures to US financial institutions; such a silent cross border bank run has already started as foreign banks are worried about the solvency of US banks and are starting to reduce their exposure. And if this run accelerates - as it may now - a total meltdown of the US financial system could occur. We are thus now in a generalized panic mode and back to the risk of a systemic meltdown of the entire financial system. And US and foreign policy authorities seem to be clueless about what needs to be done next. Maybe they should today start with a coordinated 100 bps reduction in policy rates in all the major economies in the world to show that they are starting to seriously recognize and address this rapidly worsening financial crisis.
Edit (5:55) And from the other side of the coin comes Jeffrey Miron with Bankruptcy, not bailout, is the right answer. You know, things like Nouriel Roubini's piece can chill you right to the bone. Tomorrow is October 1. The deflation scare is here and it takes the form of a 'global financial meltdown crisis' and a meltdown may well happen. We are scared. That' s all I am saying. A scare was necessary to clear the investment landscape of wild west casino hot shots. Now, if this thing holds together my 'stance', 'game plan', 'script' or whatever you want to call it is well intact.
