LONDON (Reuters) - Thousands of nervous customers queued for hours outside branches of British bank Northern Rock on Saturday desperate to withdraw savings after it was forced to seek emergency funds to weather the global credit crunch...One branch manager was forced to ring the police when a couple barricaded her in her office after they were unable to withdraw one million pounds of savings, according to a report in the Sun newspaper.
I know I posted this story pre-open yesterday, but I think it is far more serious than Wall street made it Friday. Europe reacted very negatively, while the US markets proceeded as if nothing had happened. This is not a minor event. The last time we had a run on a large bank in modern times was in 1931, the crisis of the Credit-Anstalt of Vienna, which exacerbated the effects of the '29 crash (and was incidental in bringing Hitler to power). The domino effect can be devastating. Of course, this is not 1930 post crash, but the August crisis of this year, which forced the Feds into action, and now this event with the Bank of England intervention could very well be a harbinger of dangerous times ahead. If foreign money decides to pull out of the US markets in desperate search for liquidity and the consumer really puts the brakes on spending, we could have something far more severe than a mild recession. It is imperative that the Feds ease credit and lower by at least 50 basis points next week. Intervention to support the banking system is vital, but so is consumer spending. For a brief historical brush-up, read this article: link.
It's not the intent of this blog to propagate wacky doomsday scenarios, but I want to make sure the big picture does not get lost. History does repeat itself and until we pull out of this mess, always check your rear-view mirror and ask yourself a simple question: is this trade safe to hold on to?
I know I posted this story pre-open yesterday, but I think it is far more serious than Wall street made it Friday. Europe reacted very negatively, while the US markets proceeded as if nothing had happened. This is not a minor event. The last time we had a run on a large bank in modern times was in 1931, the crisis of the Credit-Anstalt of Vienna, which exacerbated the effects of the '29 crash (and was incidental in bringing Hitler to power). The domino effect can be devastating. Of course, this is not 1930 post crash, but the August crisis of this year, which forced the Feds into action, and now this event with the Bank of England intervention could very well be a harbinger of dangerous times ahead. If foreign money decides to pull out of the US markets in desperate search for liquidity and the consumer really puts the brakes on spending, we could have something far more severe than a mild recession. It is imperative that the Feds ease credit and lower by at least 50 basis points next week. Intervention to support the banking system is vital, but so is consumer spending. For a brief historical brush-up, read this article: link.
It's not the intent of this blog to propagate wacky doomsday scenarios, but I want to make sure the big picture does not get lost. History does repeat itself and until we pull out of this mess, always check your rear-view mirror and ask yourself a simple question: is this trade safe to hold on to?
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on Saturday, September 15, 2007 at 9/15/2007 11:09:00 AM.
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