CRISIS IN THE US FINANCIAL INSTITUTIONS – CONT’D

What happened in the US financial system of late are as follows:

Just like the Titanic ship – when it first hit the iceberg (the sub-prime crisis), the ship engineers thought that the ship will not sink because the structure was that the ship has many water tight compartment and hence the ship will hold; in the same manner the US regulators thought that they can insulate the sub prime crisis from the rest of the markets; Lo and behold, as the what happen to Titanic, the whole ship (economy) is under threat – which we saw the fall of the mighty – namely Lehman Brothers (under Liquidation), Merrill Lynch (under Bank of America), AIG (own by US Government!!), next in the news is the last two Titans on the street: Morgan Stanley (which in no time will be bought by another banking group, earlier was talking to Citigroup, but failed; now talking to Wachovia Bank), and the last will be Goldman Sachs – which might survive.

The good news (or may be bad) is on the US Dollars (which has direct impact on our works) – may hold on to be steady. This is due to a very funny situation (anyway so many funny things are happening in this financial crisis), namely: excess liquidity on US Dollar is tightening – and hence maintain the Dollar to be steady, which generally under crisis – Dollar should go down. I think this trend is sustainable so far, because there wasn’t much dollar left to be thrown out by non-Us banks. Probably after the blow up of sub prime last year, most non-US banks have dumped what needed to be dumped.

Circulated earlier on 18th September 2008

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