Wednesday, November 28, 2007

The (dollar) signs are there, just receding from sight

Once I had a secret love
That lived within the heart of me
All too soon my secret love
Became impaitient to be free

Doris Day


Once, the world had a love affair with Dollar by John Lee
Not only are mortgage-backed securities distressed, but auto-loan backed securities and credit-backed securities are now beginning to experience pressure. The world had a love affair with the Dollar, and happily ate up any Dollar-denominated package that threw a 5% interest at them. [But now Abu Dhabi is demanding 11% from Citigroup.]

This $30 trillion love affair has ended and the aftermath is not pretty. To understand why the Fed has to print and bail out all those banks and funds, we highly recommend that you watch this British comedy skit from John Bird and John Fortune...

As the banker says: "One thing I learned is if you are going to cock up something, better cock up big so government has to bail you out, and if the government does not give me my money back, I will tell them, it's not my money, its your pension fund money."


Actually, though, don't you get the itchy suspicion growing in the back of your head that this dollar demise is getting close to having run its course? Guambat does.

Not that the clean up will be pretty, and not that the Bush administration, including its Fed - and FEMA - appointees, has shown much panache in cleaning up the messes it made/inherited/suffered, either.

And not, perhaps, that the dollar will regain its unique reserve status it has had over the last century. But it's just the observation that things in equilibrium tend to move to disequilibrium and vice versa; and this is pretty vice versa at the moment.

Perhaps its just the optimist in Guambat that expects some phoenix to arise after all the financial geniuses around the world again make ashes of themselves. Not to point fingers - one thing Guambat has proved to himself is that he ain't no financial genius. Still, he also manages to make an ash of hisself pretty regularly.

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