(email exchange)
Yes, but for the near term it could all look like a ‘traditional recession’ as LIBOR comes down and the ‘financial crisis’ seems to stop getting worse. Stocks could be OK with that for a while.
It will all be support by the US extending increasing (and unlimited) swap lines to foreign central banks, and ECB broadening its lending outside its member nations. And the Bank of Japan may do the same for nations and banks strung out on yen debt as evidenced by the strong yen what has been a falling budget deficit in Japan making net yen financial assets that much tougher to get.
This all supports the ‘external currency debt’ that’s happened around the world.
Problem is, however, like the traditional emerging market collapses, it takes ever increasing lending by the Fed beyond its own US member banks to hold it all together, and it all comes down when the Fed says ‘no mas’ which is will probably be forced to do (maybe by Congress if it wakes up to what’s happening) should the foreign lending look to be going parabolic.
Watch for this weeks expansion of swap lines to the ECB, BOJ, BOE, and SNB as they continue to offer unlimited USD loans to their member banks.
The only way to immediately avoid prolonged recession remains a US payroll tax holiday which will add over $20 billion per week to the incomes of workers and businesses, adding maybe 5% to US GDP and supportive of the USD incomes and exports of the rest of the world as well. Increasing govt. spending on needed projects and state revenue sharing for same would also work but would take much longer to kick in and be narrower in focus. These could be done as well and when they do kick in should the economy show signs of overheating methods to reduce demand might be appropriate. But most expansions do this ‘automatically’ as the last one did. The problem is getting the politicians to realize that falling budget deficits during an expansion are not a ‘good thing’ per se.
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> On Mon, Oct 20, 2008 at 3:53 AM, Bob wrote:
>
> Hi
>
> This says a lot too about how bad things are and will become > further:
>
Absence of IPOs Hits 10 Weeks
By Lynn Cowan
It’s official: The U.S. IPO market has seized up completely, with a record-setting stretch of inactivity that began in August.
It’s been 10 weeks since a company has held an initial public offering in the U.S., the longest period on record since Thomson Reuters began tracking deals in 1980. The last deal occurred on Aug. 8, when Rackspace Hosting Inc. made its debut on the New York Stock Exchange.
If the vacuum continues throughout October, it will mark the first consecutive two-month period without an IPO in the U.S. since Thomson Reuters began keeping track. The company’s data includes real-estate investment trusts but excludes closed-end funds and special-purpose acquisition companies.
The last similar empty stretch on the IPO calendar was from Feb. 27 to May 12 in 2003, a 74-day period, according to Standard & Poor’s Capital IQ database, which excludes REITs as well as closed-end funds and SPACs. Today marks the 73rd day since Rackspace priced, and with no deal in sight this week, that number will easily be passed.
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