Friday 14 March 2008

Cleaning up tough Bare Stains

No prophet of economics

The layman observer economist in my dreams suddenly acquired a mitre to my collection of hats.

In fact, the economist part is not so much the science but the basic observation of human character and nature; the mitre infers the accident of prognostication.

Before anyone beats a path to the church of the prophetess of sub-prime consequences, I have nothing to offer you about the lottery numbers for this weekend or any other weeks in the future, the ones for last week, even you can find out.

Dishonesty breeds distrust

I had before mentioned in a series of blogs regarding the sub-prime mortgage crises; that the activity started off with dishonesty regarding means and ways, it lead on to greed regarding acquiring economically unsound customers and this was given a false copper bottom by slicing up the debts and repackaging it with the best ratings on the market.

In a bull market, a good number of banks bought that bull and have now been caught out without the bull but a pair of paper marché horns.

For over six months, banks have been wary of what other fellow banks have gotten into and how much of bull or horns they have got left. So, no bank is willing to lend to another just in case the money goes into a black hole – that is the loss of trust.

Throwing in everything

The horses have already bolted, I say, meanwhile, someone is trying to lock the gates anyhow. The black hole no matter how minuscule was created when banks and customers veered from trustworthy contracts at the beginning of sub-prime deals and this is just one of the many causative issues in what we now know as the credit crunch.

Escaping the gravitation pull of the black hole is tending towards to seriously expensive with almost $1 trillion thrown to the beast with sub-prime, credit-crunch, recession and inflation heads in monetary stabilisation, socialist amelioration, write-downs and bale-outs with no let or give of respite.

Bare Stains

So, whilst the Northern Dust in England received emergency funds that resulted in a bank-run last September, we have Bare Stains (Bear Sterns) granted such emergency funds sending a shudder through the markets and giving us a feeling of foreboding that we are no where near the end of the economic crises.

If honesty were still not the best policy, especially in business, what other policy do we have to do business and avoid this mess?

These are just bare stains which cannot be easily wiped off with emergency funds; the real muck is still somewhere out there waiting to be unveiled, no amount of throwing money and policy at it would solve it till the truth is out about how everyone got caught out.

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