I Must Inform

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -Henry Ford
I like this quote although I disagree with it. If Henry Ford understood how it worked, he would have realized he would have not have been as successful if a bank hadn't given him money to finance his dreams. Or he would have been more successful if he realized someone needed to finance consumers who wanted to purchase his cars. Who financed his 5 bankruptcies?

WARNING: This is a boring article on economic related matters. Don't read if you are allergic to money. I try to keep my blog light and fluffy, but sometimes I think an all-dessert diet begs indigestion. It is pretty much impossible to talk about this in a short blog, but I must since I am a banker in these VERY INTERESTING economic times, lest anyone forget. And so I digress...

What you should know:
Banking and really anything financial boils down to trust. The markets rally or sink based on trust. Did I trust that Bear Sterns was a company of integrity that would never get mixed up in bad loans? Do I trust that anything on the market isn't part of the toxic waste loans? People trusted their non-regulated non-bank mortgage lenders to give them a house. I emphasize non-regulated non-bank because an investment bank is not a bank, it WAS (before it died) a high-risk, non-FDIC insured company that added bank to its name to imply trust. This trust was unfortunately misplaced and now the world is paying for it. The dollar grows weak or strong based on trust. Do other countries still trust us enough to use our currency because they believe we are politically stable and will not default on debt? If the world doesn't trust that we can get ourselves out of the mess we got ourselves into, we can trust they that will flee from us like the plague. You can trust that they will never blindly trust us again.

Obituaries since Sept: Read 'em and weep
-In September, the US reportedly averted a total economic collapse (NOT GOOD! As in near halt of credit card limits, mortgages, student loans, car loans, commodities, etc, as companies would begin to fail like dominoes)
-Global recession officially began when Lehman Bros. (investment bank) was allowed to fail in Sept.
-Iceland, an ENTIRE COUNTRY, went bankrupt.
-In November, Goldman Sachs and Morgan Stanley (investment banks) are converted to commercial banks, ending the risky investment bank era.
-World growth is expected to fall to ½ %, the lowest since WWII.
-A $700 billion blank check was thrown at the US economy (greater than all foreign aid from rich to poor countries in 7 years and enough to save Social Security for the next 100 years)
-The world economy is shuddering to a halt, since the US has historically been the source of 1/3 of global demand.
-Lloyds TSB, which many in Japan use for sending money home, is flailing as a result of a government-forced marriage to a “toxic bank”.
-The UK and Switzerland are in DANGER as each carries debt in foreign dollars which means that the debt can spike out of control very quickly (Ex. In Sept, if I sent $1,000 from Japan [in yen] to the US [in dollars], I lost about $70 depending on the day. Today, if I send $1,000 to the US, I make $70 depending on the day. Now multiply that times billions and imagine me as a country and it gets really scary and unpredictable.) The US carries debt in mostly dollars, so at least in that aspect, we're golden.
-China and India are still expected to grow and many look to them as the world's economic saviors.