+++ RBS Down 39% +++
What a Mass Bank Bail-Out Does to the Currency
This is what could happen to the pound if the Treasury decides to print cash to bail out collapsing banks. The Icelandic Króna has lost 40% in value in three months. The Icelandic Króna is not the Great British Pound, the UK economy is far larger and hopefully stronger. Little Iceland could go bust and end up begging the IMF, a humiliation suffered by Britain under the last Labour government. Nothing, however, is impossible.
If...
Tuesday, 7 October 2008
No short-sellers were involved this morning. Yet Gordon and Darling said they were banning short selling to protect financial institutions (Cable, who should know better, cheered this on). Guido and most objective market observers said it was irrelevant. Today's market action proves the point. QED
The FT reports some good news; $500 billion in derivatives contracts related to Fannie Mae and Freddie Mac were settled yesterday. Friday, 17 October, sees $400 billion of Lehman Credit Default Swaps (CDS) come due for settlement. If this goes through without mishap, market liquidity could improve as fears of systemic failure recede and the biggest ever stress test for derivatives contracts passes.
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