Nouriel Roubini Warns Of Possible “Mother Of All Bank Runs,” Urges Morgan Stanley and Goldmam Sachs To Find Foreign Buyers

Posted on September 29, 2008 by Mike Bock

There’s an old song that warns about nuclear destruction that says, “Brother, when Einstein gets worried, you’d better get worried.”

It has been proven lately, that if the economics professor Nouriel Roubini, “Dr. Doom,” is worried we should also be worried. Today, Roubini has comments on his web-site that shows he is very worried.  His comments are alarming.  Excerpts:

  • It is obvious that the current financial crisis is becoming more severe …
  • This is not just a US financial crisis; it is a global financial crisis hitting institutions in the US, UK, Eurozone and other advanced economies (Iceland, Australia, New Zealand, Canada etc.).
  • In a solvency crisis and credit crisis that goes well beyond illiquidity no one is lending to counterparties as no one trusts any counterparty (even the safest ones) and everyone is hoarding the liquidity that is injected by central banks.
  • Both institutions (Morgan Stanley and Goldman Sachs) are highly recommended to stop dithering and playing for time as delay will be destructive: they should merge now with a large foreign financial institution as no US institution is sound enough and large enough to be a sound merger partner.
  • When investors don’t trust any more even venerable institutions such as Morgan Stanley and Goldman Sachs you know that the financial crisis is as severe as ever and the fear of collapse of counterparties does not spare anyone. When a nuclear option of a monster $700 billion rescue plan is not even able to rally stock markets (as they are all in free fall today) you know this is a global crisis of confidence in the financial system.
  • There is a generalized loss of confidence in financial markets and in financial institutions that no policy action seem to be able to control.
  • 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;
  • 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.
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The $700 Billion Bailout Should Be A Powerful Teaching Opportunity For Presidential Candidates

Posted on September 29, 2008 by Mike Bock

I’ve been thinking what a powerful teaching opportunity this $700 Billion bail out presents to us — it should be a big motivation to explore the truth of our whole economic system.  Exploring truth, of course is dangerous in a political setting, and this great teaching moment may be a lost opportunity.

I’ve been thinking about making a short video, based on the 80’s movie, “My dinner with André” : two people engaged in a philosophical conversation, at a fancy restaurant, where the concept of truth is explored.  In my version, my video would be set in my dahlia garden.  Truth, beauty, mortality, drama — dahlias have it all.

I would include in my dahlia script, for example, an article I found recently written by an Oxford professor, that speculates that there is a possibility that the basic Matrix movie premise is correct — we are, in fact, living in a computer simulation.

In the original Matrix movie, the main character, Nemo, is asked, “How far down the rabbit hole do you want to go?” Good question.  How much truth can we handle?

We all were taken down the rabbit hole this week when, suddenly, the ground under us was magically removed as our lame duck president demanded $750 Billion — Immediately. Now. Or else.  Huh?

Secretary of the Treasury Paulson was asked what happens if this massive amount of money doesn’t work.  He said, “It has to work.” Very reassuring.

The idea that reality, as we know it, is a sham, suddenly seems debatable. It is no wonder people go crazy. Sometimes, even for those of us deemed sane, everything seems a conspiracy, a lie wrapped within an untruth, enveloped in a spin. Does anyone, for example, really believe whatever it is that George W. Bush reads off of his TelePrompTer?

The $700 Billion demand is astonishing.  What an opportunity. It is almost as if the stars are aligning.  Our nation has the potential of a powerful teaching moment, one that intersects with a presidential election.  This election should be all about telling the truth.  But it seems far from concentrating on that great task.

Dahlias make me philosophical, in part, I guess, because in Dayton, the first frost date is October 10. Dahlias are late bloomers. Here it is, almost October, and still I have some large plants that have not yet bloomed.  I’m getting worried.

This election should be a watershed moment in the vitalization of our democracy, and in the growth of a more prosperous and more just economy.  A dahlia has a short time to reveal itself, a short time to get it right.  So do we.  We should all be worried.

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Let’s Promote Web-Based Debate By Local Candidates Using “Bloggingsheads” TV Format

Posted on September 29, 2008 by Mike Bock

Looking through the New York Times on-line this morning, I discovered “Bloggingheads”: a library of videos featuring a split screen discussion between two people. The feature is not unique to the NYT, but comes from a Blogginghead’s web-site.

I’m thinking that this general format could be used in political campaigns. I’d like to see candidates for political office engage each other in web-based discussions.  In fact, I think it would be great, if we could Bring Back Lincoln Douglas Style Debates To Today’s Campaigns using this technology.

I want to investigate how DaytonOS might organize on-line debates for local candidates in this election — candidates for the State Assembly, County Sheriff, County Commission, and U.S. Congress. Posting a debate on-line would give the opportunity for extended dialogue between the debate participants and viewers.

Here is what Wikipedia says:  “Bloggingheads.tv is a political, world events, philosophy, and science video blog discussion site in which the participants take part in an active back and forth conversation via webcam which is then broadcast online to viewers. The site was started by the journalist Robert Wright (The Moral Animal) and the blogger and former journalist Mickey Kaus on November 1, 2005.[1] (Kaus has since dropped out of operational duties of the site as he didn’t want his frequent linking to be seen as a conflict of interest.[2]) Most of the earlier discussions posted to the site involved one or both of those individuals, but since has grown to include a total of more than 150 other individual contributors, mostly journalists, scientists, authors, well known political bloggers, and other notable individuals.

“Unregistered users are able to view all of the videos which are contained on the site, while free registration is required to comment on the individual discussions, or participate in the forums.”

Robert Wright, left, of Bloggingheads.tv and Daniel Gross of Newsweek debate whether homebuyers can be protected from their own bad judgment.

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