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Some time ago we suggested Prof. Charles Kindleberger's fabulous anatomy of a crash to our subscribers. We have just started moving into the panic stage.

We had the distress bit over the past couple of weeks and are moving into its final spasms. That China moved up despite high headline inflation - well, we all make mistakes, right? I still think that there will be a dump in China.

If you can get today's FT, do. Read about the "SIV" crisis: that's the SUV of the financial world, such Structured Investment Vehicles. Apparently there are lots of loans due in America today, Monday, and this coming Wednesday.

So distress spasms are morphing into panic convulsions, in Kindleberger's model.

Here is how a friend explained this to me over coffee in Hong Kong today: even if sub-prime loans account for only 9% of CDOs, the rest of the CDO can get infected by them. That is because the banks won't lend. So, even if the Fed and ECB and Asian Central Banks are injecting liquidity, the transmission mechanism - whereby banks on-lend this liquidity - has been interrupted: banks don't want to lend. They are scared to. So what does the guy with the CDO debt do? He/she sells their other assets. That fire sale is about to rage.