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I know... I know, Fed cuts and discount rate cuts fix everything.... but back to the real world

  • Chip Mason, chief executive and founder of Legg Mason (NYSE:LM) , one of the world's largest money managers, said on Tuesday that the credit markets are in the worst state he has seen in his 47 years in the business.
  • "It is a very unusual situation. I have not seen anything like this, where nothing is traded," said Mr Mason. Legg has more than $1,000bn in assets under management, including several large money market funds.
  • Mr Mason said the US Treasury should put $20bn into the planned structured investment vehicles superfund, in an indication that the government was standing behind it. (sure, why not - bailouts help everyone)
  • Isaac Souede, the founder of Permal, another Legg subsidiary which is one of the largest hedge fund of funds, said this year had also been the most challenging he had experienced in his 21 years in the industry.
  • He added that if the US went into recession, "China will fall hard and take the rest of Asia with it. I don't think that China can withstand a severe U.S. recession". (but they keep telling us it's all decoupled....)
From the Telegraph, the British are begging for cuts as well... easy credit, its a worldwide drug.... not that there is a problem or anything and the US market is near all time highs ;)
  • The sterling interbank market has collapsed at the fastest rate in modern history, prompting pleas for immediate rate cuts from a chorus of top British economists.
  • Office for National Statistics data sourced to the Bank of England shows the volume of market loans in the banking system plunged from £640bn at the onset of the credit crunch in August to £249bn by the end of September, suggesting British lenders have been hit even harder than US banks in relative terms.
  • "This is one hell of a shock to the financial system," said Professor Tim Congdon, a leading monetarist at the London School of Economics. (I'd say)
  • "A market that has taken 30 years to build has completely imploded in a matter of months. Lenders have been squeezed savagely. We've moved into a different era," he said.

Funny... just keep in mind, the easy credit drug is now in all developed nations. Once again, America leads the way with its innovation and trend setting. For this we have housing bubbles in the UK and Spain. Those darn Germans never fell for these tricks - they kept down payment requirements at 20%. They must be stuck in the stone age - don't they realize this is the era of financial innovation and unabashed risk taking? An era where you can package thousands of bad loans together into one product and that product becomes safe? It's call alchemy. Try it sometime Germany....

So the solution to all these problems? Get us back to the same place we were in 2001-2002 so we can play this game all over again. Fantastic.

Now the good news, is it appears we are on a path for all developed 'first world' (i.e. very innovative) countries to drop rates in unison because recessions are no longer allowed. So the dollar should not crumble against those nations partaking in this return of free money for everyone. So I guess this is 'great' news if you hold dollars... we are all in this together....

Meanwhile somewhere Mr O'Neal from Merrill Lynch is enjoying is $160 million, and snickering at those left to clean up this small mess [You're Fired! Now Here is $160M to Help Ease the Pain].... did everyone forget the story about asking hedge funds to hold bad loans until this mess "blows over" - how quickly we forget. [The Games They Play: Merill Lynch]

***********Emerging markets are being favored in part because "financial innovations are less common in developing countries," said Heidemarie Wieczorek-Zeul, German economics minister, in remarks to the IMF/World Bank Development Committee.
Source: Legg Mason's Chief: Credit Markets the Worst He's Seen in 47 Year Career