I've included below an article in the Guardian newspaper (http://www.guardian.co.uk/business/2008/sep/26/wallstreet.banking?commentpage=1), followed by two comments by myself. I didn't mention in the comments that I was the sole implementer and main designer of an artificial intelligence/simulation language called SDML (which stands for "Strictly Declarative Modelling Language"). I plan to publish a new version soon at www.sdml.org.uk, so that eventually we (progressive forces in the world) will have as good software as our enemies. for more information on SDML, go to http://www.socialiststeve.me.uk/sdml.htm).
Markets in turmoil as US financial bail-out stalls
- Julia Kollewe
- guardian.co.uk,
- Friday September 26 2008 10:15
Stockmarkets were plunged into turmoil today after talks on a $700bn (£380bn) rescue for the US financial sector descended into chaos and the country's largest savings and loans company Washington Mutual collapsed in America's biggest banking failure.
The FTSE 100 index in London dropped 90.2 points in early trading, a fall of 1.74%, and traded down 60.2 points at 5136.8 points mid-morning, a decline of 1.16%. All Asian stockmarkets slid, with Japan's Nikkei closing down nearly 1%. Oil prices were also hit by the uncertainty over the bail-out package, with US crude falling $3 to $105 a barrel. The yen jumped by more than 1% against the dollar as investors rushed to buy the safe haven currency. The dollar fell to ¥105.26.
Spread-betting firm GFT Global Markets predicted the Dow Jones industrial average would fall 147 points and the Nasdaq 29.5 points when the US markets open.
"This financial version of 'deal or no deal' is not conducive to restoring badly-needed confidence," said Martin Slaney, head of derivatives at GFT. "The on-going discord is massively unsettling and the fact that we now have Washington Mutual added to the list of casualties is escalating the cynicism. If a deal hasn't been signed and sealed over the weekend, expect massive market turmoil. Monday will be a bloodbath."
Gordon Brown travels to Washington today for emergency talks on the financial crisis with his US counterpart, George Bush.
Last night US lawmakers were close to a final agreement on the bail-out, but an emergency White House meeting between congressional leaders and Bush "devolved into a contentious shouting match," according to a statement from the John McCain campaign. The meeting was attended by the two presidential candidates, McCain and Barack Obama.
Republicans balked at treasury secretary Henry Paulson's proposal to buy bad debts from banks and instead floated an idea of their own for mortgage insurance, throwing the whole rescue into doubt.
President Bush warned in a televised address to the nation on Wednesday night that "our entire economy is in danger" if the bailout package does not go ahead. "Without immediate action by Congress, America can slip into a major panic," he said.
Adding to the gloom in Britain, it emerged today that the UK's biggest bank HSBC is laying off 1,100 people worldwide - 4% of its global investment banking operations - including 500 in the UK.
Federal regulators closed WaMu in the early hours and seized its assets, then sold much of the company to JP Morgan Chase for $1.9bn. The deal will create the largest bank in the country, ahead of Bank of America. It is the second time the authorities have called on JP Morgan after the investment bank took over Bear Stearns in a rescue orchestrated by the US Federal Reserve in March.
Customers have rushed to take their money out of WaMu, which has suffered $16.7bn of deposit withdrawals in recent months. The firm - the equivalent of a British building society - held $188bn in deposits as of June, far more than any US bank that has ever failed.
WaMu, which was founded in Seattle in 1889, has seen its share price virtually wiped out after it made thousands of mortgage loans that its borrowers cannot repay, saddling it with billions of dollars in bad debts.
The deal was orchestrated by Sheila Bair, chairman of the Federal Deposit Insurance Corp, on terms that preserve Washington Mutual's deposits and avoid what could have been a huge drain on the insurance fund that protects deposits of up to $100,000.
Central banks stepped up their efforts today to ease the unprecedented strains in the banking system and calm markets. The European Central Bank, the Bank of England and the Swiss National Bank announced a new plan to pump in billions of dollars of one-week loans for the first time. "Central banks continue to work together closely and are prepared to take further steps as needed to address the ongoing pressure in funding markets," they said.
The ECB said it would lend $35bn while the SNB offered $9bn. The BoE said it was switching $30bn of funds it had been offering overnight to one-week funds "to address funding pressures over quarter-end" and offered another £40bn in medium-term funds. The Bank's first three-month auction will be held on Monday.
Philip Shaw, chief economist at Investec, said: "This is a huge step forward and reflects the fact that credit markets have almost totally seized up over the last week and half."
With commercial banks reluctant to lend to each other and hoarding cash, the Fed expanded its foreign exchange swaps facilities with the ECB and the SNB to pump money into the banking system.
A week ago, the world's leading central banks - the Fed, BoE, ECB, Bank of Japan, SNB and Bank of Canada took coordinated action to provide $180bn (£100bn) in extra liquidity.
This morning on Asian stock markets, Tokyo's Nikkei closed down 0.94% at 11893.16. Taiwan's stock market fell 2.16% to 5929.63 while Hong Kong's Hang Seng was down 1.33% at 18682.09 and Singapore's Straits Times lost 1.48% to 2408.12.
Oil prices fell more than $3 to $105 a barrel. US crude for November delivery later traded down $2.70 at $105.32, compared with $108.02 yesterday. In London, Brent crude fell $2.42 to $102.18.
"It is a very volatile time and the market will get more and more jittery each day the US rescue plan gets delayed," said John Vautrain, an energy analyst at Purvin & Gertz in Singapore.
The early editions of the newspapers got it wrong - stating that a deal had been reached (see http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/7637132.stm). Why did they think that? Big business uses artificial Intelligence (AI) software to model (simulate) the world and predict what is going to happen, but they cannot take the free will of individuals into account! They probablty predicted that Barack Obama would sell out, betraying the ordinary working and middle class people who support his presidential bid, accepting a dreadful deal that the Republicans wanted.
The Democrats should have demanded a stake in companies being bailed out, curbs on executive pay and bonuses and help for mortgage holders faced with losing their homes - and I think they were demanding such measures, but we may have to wait for later reports to find out.
It's good that the Republicans rather than the Democrats walked out, so they will get the blame for the collapse of the talks, and of course the resulting collapse of Washington Mutual, the US's largest savings and loans company as reported above.
I include below a section of my document on strategy for achieving a socialist society with a government elected by proportional representation (not hierarchies of committees based on workplaces as Marxists call for). I made one serious mistake - you don't get a free mortgage/loan/overdraft if a bank collapses according to the BBC's "Working Lunch" programme. For more of my analysis on the credit crunch and excerpts from the press, go to http://www.revolutionaryplatform.net/forum/index.php?board=156.
As chancellor, current British prime minister Gordon Brown claimed to have ended the cycle of boom and bust, which has proved impossible under capitalism. The New Labour government borrowed heavily to prolong the boom and we are now entering a severe recession. Big business and its New Labour allies are trying to make working class people pay for their crisis – escalating food and fuel prices and a housing slump, with big cuts in living standards unless we go on strike.
The credit crunch is mainly blamed on subprime mortgages in the USA, sold to people with a poor credit history and with high interest rates starting low. This caught many ordinary people out, since most US mortgages are at a fixed rate for the entire term, which (due to high inflation) could lead to many banks around the world that have lent the money for such prime conforming mortgages facing bankruptcy. New Labour would probably bail other banks out like when it nationalised Northern Rock (and like the US government recently did with Fannie Mae and Freddie Mac which guarantee only prime conforming mortgages) or lent £50 billion without revealing to whom, but other governments may adopt a different approach.
[On the day I finished writing this document, the US government indeed failed to step in to save Lehman Brothers, the fifth largest investment bank in the world, and it went bankrupt. This is having a big knock-on effect on shares in other banks around the world, with the shares of HBOS (Halifax Bank of Scotland), RBS (Royal Bank of Scotland) and Barclays particularly collapsing, despite the Bank of England pumping another £5 billion into the market today. Barclays reportedly tried to launch a takeover for Lehman before it collapsed; we can speculate whether its takeover attempt was an indication that Barclays has a lot of spare money to spend on the takeover, a bluff (to pretend it is not in financial difficulties), a panic measure (perhaps because it has lent Lehman a lot of money that it could now lose with the bankruptcy) or a desperate attempt to improve its balance sheet with public money (the denial of which caused the takeover attempt to
collapse). Whatever the cause, the big fall in Barclays share price today will knock confidence in its solvency. If I had savings in HBOS, Barclays or RBS, Id withdraw them ASAP! The adage that such institutions are too big to fail now seems out-of-date, and even if New Labour nationalises more UK banks (which the Tories say they wouldnt do), shareholders can expect little or nothing for their shares. The collapse of a high-street bank would entail many waiting months for compensation for their savings (if indeed they dont lose them); New Labour has promised an improved compensation scheme but legislation for it has yet to be passed and banks have refused to finance it in advance. Those with mortgages in a collapsed bank wouldnt have to pay it back, so some working class people will gain from this financial chaos!]
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I've included below an article in the Guardian newspaper (http://www.guardian.co.uk/business/2008/sep/26/wallstreet.banking?commentpage=1), followed by two comments by myself. I didn't mention in the comments that I was the sole implementer and main designer of an artificial intelligence/simulation language called SDML (which stands for "Strictly Declarative Modelling Language"). I plan to publish a new version soon at www.sdml.org.uk, so that eventually we (progressive forces in the world) will have as good software as our enemies. for more information on SDML, go to http://www.socialiststeve.me.uk/sdml.htm).
Markets in turmoil as US financial bail-out stalls
Stockmarkets were plunged into turmoil today after talks on a $700bn (£380bn) rescue for the US financial sector descended into chaos and the country's largest savings and loans company Washington Mutual collapsed in America's biggest banking failure.
The FTSE 100 index in London dropped 90.2 points in early trading, a fall of 1.74%, and traded down 60.2 points at 5136.8 points mid-morning, a decline of 1.16%. All Asian stockmarkets slid, with Japan's Nikkei closing down nearly 1%. Oil prices were also hit by the uncertainty over the bail-out package, with US crude falling $3 to $105 a barrel. The yen jumped by more than 1% against the dollar as investors rushed to buy the safe haven currency. The dollar fell to ¥105.26.
Spread-betting firm GFT Global Markets predicted the Dow Jones industrial average would fall 147 points and the Nasdaq 29.5 points when the US markets open.
"This financial version of 'deal or no deal' is not conducive to restoring badly-needed confidence," said Martin Slaney, head of derivatives at GFT. "The on-going discord is massively unsettling and the fact that we now have Washington Mutual added to the list of casualties is escalating the cynicism. If a deal hasn't been signed and sealed over the weekend, expect massive market turmoil. Monday will be a bloodbath."
Gordon Brown travels to Washington today for emergency talks on the financial crisis with his US counterpart, George Bush.
Last night US lawmakers were close to a final agreement on the bail-out, but an emergency White House meeting between congressional leaders and Bush "devolved into a contentious shouting match," according to a statement from the John McCain campaign. The meeting was attended by the two presidential candidates, McCain and Barack Obama.
Republicans balked at treasury secretary Henry Paulson's proposal to buy bad debts from banks and instead floated an idea of their own for mortgage insurance, throwing the whole rescue into doubt.
President Bush warned in a televised address to the nation on Wednesday night that "our entire economy is in danger" if the bailout package does not go ahead. "Without immediate action by Congress, America can slip into a major panic," he said.
Adding to the gloom in Britain, it emerged today that the UK's biggest bank HSBC is laying off 1,100 people worldwide - 4% of its global investment banking operations - including 500 in the UK.
Federal regulators closed WaMu in the early hours and seized its assets, then sold much of the company to JP Morgan Chase for $1.9bn. The deal will create the largest bank in the country, ahead of Bank of America. It is the second time the authorities have called on JP Morgan after the investment bank took over Bear Stearns in a rescue orchestrated by the US Federal Reserve in March.
Customers have rushed to take their money out of WaMu, which has suffered $16.7bn of deposit withdrawals in recent months. The firm - the equivalent of a British building society - held $188bn in deposits as of June, far more than any US bank that has ever failed.
WaMu, which was founded in Seattle in 1889, has seen its share price virtually wiped out after it made thousands of mortgage loans that its borrowers cannot repay, saddling it with billions of dollars in bad debts.
The deal was orchestrated by Sheila Bair, chairman of the Federal Deposit Insurance Corp, on terms that preserve Washington Mutual's deposits and avoid what could have been a huge drain on the insurance fund that protects deposits of up to $100,000.
Central banks stepped up their efforts today to ease the unprecedented strains in the banking system and calm markets. The European Central Bank, the Bank of England and the Swiss National Bank announced a new plan to pump in billions of dollars of one-week loans for the first time. "Central banks continue to work together closely and are prepared to take further steps as needed to address the ongoing pressure in funding markets," they said.
The ECB said it would lend $35bn while the SNB offered $9bn. The BoE said it was switching $30bn of funds it had been offering overnight to one-week funds "to address funding pressures over quarter-end" and offered another £40bn in medium-term funds. The Bank's first three-month auction will be held on Monday.
Philip Shaw, chief economist at Investec, said: "This is a huge step forward and reflects the fact that credit markets have almost totally seized up over the last week and half."
With commercial banks reluctant to lend to each other and hoarding cash, the Fed expanded its foreign exchange swaps facilities with the ECB and the SNB to pump money into the banking system.
A week ago, the world's leading central banks - the Fed, BoE, ECB, Bank of Japan, SNB and Bank of Canada took coordinated action to provide $180bn (£100bn) in extra liquidity.
This morning on Asian stock markets, Tokyo's Nikkei closed down 0.94% at 11893.16. Taiwan's stock market fell 2.16% to 5929.63 while Hong Kong's Hang Seng was down 1.33% at 18682.09 and Singapore's Straits Times lost 1.48% to 2408.12.
Oil prices fell more than $3 to $105 a barrel. US crude for November delivery later traded down $2.70 at $105.32, compared with $108.02 yesterday. In London, Brent crude fell $2.42 to $102.18.
"It is a very volatile time and the market will get more and more jittery each day the US rescue plan gets delayed," said John Vautrain, an energy analyst at Purvin & Gertz in Singapore.
--
The early editions of the newspapers got it wrong - stating that a deal had been reached (see http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/7637132.stm). Why did they think that? Big business uses artificial Intelligence (AI) software to model (simulate) the world and predict what is going to happen, but they cannot take the free will of individuals into account! They probablty predicted that Barack Obama would sell out, betraying the ordinary working and middle class people who support his presidential bid, accepting a dreadful deal that the Republicans wanted.
The Democrats should have demanded a stake in companies being bailed out, curbs on executive pay and bonuses and help for mortgage holders faced with losing their homes - and I think they were demanding such measures, but we may have to wait for later reports to find out.
It's good that the Republicans rather than the Democrats walked out, so they will get the blame for the collapse of the talks, and of course the resulting collapse of Washington Mutual, the US's largest savings and loans company as reported above.
I include below a section of my document on strategy for achieving a socialist society with a government elected by proportional representation (not hierarchies of committees based on workplaces as Marxists call for). I made one serious mistake - you don't get a free mortgage/loan/overdraft if a bank collapses according to the BBC's "Working Lunch" programme. For more of my analysis on the credit crunch and excerpts from the press, go to http://www.revolutionaryplatform.net/forum/index.php?board=156.
Economic crisis will provide opportunities to put socialism on the agenda
As chancellor, current British prime minister Gordon Brown claimed to have ended the cycle of boom and bust, which has proved impossible under capitalism. The New Labour government borrowed heavily to prolong the boom and we are now entering a severe recession. Big business and its New Labour allies are trying to make working class people pay for their crisis – escalating food and fuel prices and a housing slump, with big cuts in living standards unless we go on strike.
The credit crunch is mainly blamed on subprime mortgages in the USA, sold to people with a poor credit history and with high interest rates starting low. This caught many ordinary people out, since most US mortgages are at a fixed rate for the entire term, which (due to high inflation) could lead to many banks around the world that have lent the money for such prime conforming mortgages facing bankruptcy. New Labour would probably bail other banks out like when it nationalised Northern Rock (and like the US government recently did with Fannie Mae and Freddie Mac which guarantee only prime conforming mortgages) or lent £50 billion without revealing to whom, but other governments may adopt a different approach.
[On the day I finished writing this document, the US government indeed failed to step in to save Lehman Brothers, the fifth largest investment bank in the world, and it went bankrupt. This is having a big knock-on effect on shares in other banks around the world, with the shares of HBOS (Halifax Bank of Scotland), RBS (Royal Bank of Scotland) and Barclays particularly collapsing, despite the Bank of England pumping another £5 billion into the market today. Barclays reportedly tried to launch a takeover for Lehman before it collapsed; we can speculate whether its takeover attempt was an indication that Barclays has a lot of spare money to spend on the takeover, a bluff (to pretend it is not in financial difficulties), a panic measure (perhaps because it has lent Lehman a lot of money that it could now lose with the bankruptcy) or a desperate attempt to improve its balance sheet with public money (the denial of which caused the takeover attempt to collapse). Whatever the cause, the big fall in Barclays share price today will knock confidence in its solvency. If I had savings in HBOS, Barclays or RBS, Id withdraw them ASAP! The adage that such institutions are too big to fail now seems out-of-date, and even if New Labour nationalises more UK banks (which the Tories say they wouldnt do), shareholders can expect little or nothing for their shares. The collapse of a high-street bank would entail many waiting months for compensation for their savings (if indeed they dont lose them); New Labour has promised an improved compensation scheme but legislation for it has yet to be passed and banks have refused to finance it in advance. Those with mortgages in a collapsed bank wouldnt have to pay it back, so some working class people will gain from this financial chaos!]
...
To read the rest, go to http://socialiststeve.me.uk/strategy.htm.
--
I have just noticed another mistake in the excerpt for my document included above - although I cannot remember legislation going through the House of Commons, the Financial Services Compensation Scheme does guarantee the first 35,000 pounds (see www.fscs.org.uk), although the website also says that a levy of financial institutions raises a maximum of 4.1 billion pounds a year.
Obviously, the taxpayer would have to cough up the remainder (or rather the government would have to borrow an even more massive number of billions of pounds) - and if a government refused to compensate depostors, there would be such massive public opposition on the streets that the government would collapse, and quite possibly a socialist revolution would take place!!!
--
Steve Wallis (Manchester, England)
Preferred email address: revolutionarysocialiststeve@...
Blogs: http://groups.yahoo.com/group/steve-wallis-socialist-blog,
http://blog.myspace.com/galaxiasteve
My socialist website: http://www.socialiststeve.me.uk
My pages at MySpace: http://www.myspace.com/galaxiasteve and Bebo:
http://www.bebo.com/SteveW519
Founder, Good Intentions Network: http://www.goodintentionsnetwork.org
Founder, Ethical Capitalism Network: http://www.ethicalcapitalism.net
Founder, Foundation for PR-based Socialism: http://www.PRsocialism.org
Founder, Revolutionary Platform Network: http://www.revolutionaryplatform.net
My socialist band, Red Day: http://www.red-day.net
Author, "Revolution Destroyed? Have I ensured that a world socialist revolution will never happen?": http://www.revolutiondestroyed.net
For discussion of the credit crunch, go to
http://www.revolutionaryplatform.net/forum/index.php?board=156
For discussion of 9/11 conspiracy theories, go to http://www.revolutionaryplatform.net/forum/index.php?board=89