AfterTheParty

After the party usually comes the hangover. On this particular occasion the party was for the general celebration for the victory of Barack Obama and the problem remains mainly the economy.

Today in the UK The Bank of England’s Monetary Policy Committee unexpectedly voted to reduce the official Bank Rate paid on commercial bank reserves by 1.5 percentage points to 3%.

This is the lowest since 1955 as these crucial U.K. policy makers attempt to put the brakes on the worst banking crisis since the Great Depression.

This huge cut was not predicted by any of the main quoted economists.

``It's absolutely staggering and deeply impressive,'' said the director of economic research at Societe Generale in London, Brain Hilliard. ``They are clearly grasping the nettle and taking deep action. Boy, this is going to have an impact.''

The seizure in credit markets has helped push Britain to its first recession since 1991, which created the need for the initial 50 billion-pound ($80 billion) bank rescue package from the government and a half-point emergency rate cut on Oct. 8.

The British government immediately stepped up its already intense pressure on commercial banks to speedily pass on these rate reductions to their businesses and consumers.

As for us common folk, here are some of the exchanges between myself and some of my readers overnight. I have removed personal details and edited for space. Many thanks for the many contributions; I’m sorry I couldn’t use them all. They are in reverse time order, the most recent at the end.

From: Steve
To: Tony
Sent: Thu, 6 Nov 2008 11:01 am
Subject: DOW down

So the DOW dropped 500 pts on Wednesday. The biggest post election drop in history. Do you think this is a sign of what's to come? I pray not.

Date: Thursday, November 6, 2008, 5:11 AM

My guess is that it gets worse before it starts to get better. Breton Woods Mk 2 might begin to start up some new confidence, but I think there's a lot else needs to be done before the free market begins to look free and attractive again. Personally, if I had spare cash, and I am working on that, I would be investing it in the market right now. But that shows I am probably just as big an idiot as the rest of them.

Tony

-----Original Message-----
From: Steve
Sent: Thu, 6 Nov 2008 11:27 am
Subject: Re: DOW down

You’re not an idiot. Warren Buffet advises to do exactly that. I too wish I had some "spare" cash to invest, as I would follow suit. Good luck to you. I enjoy our little chats.


Steve,

Thanks for the vote of confidence, which is probably undeserved. But I did predict the collapse nearly 2 years ago and was laughed at by my academic and consultant peers, especially those in banking!


Tony


From: Brad
Sent: Thu, 6 Nov 2008 11:50 am
Subject: Re: [tonybeingcreative] EverythingisPossible

Tony:

I have a friend who is opening a restaurant in Ohio (he used to have one here in town). All vendors want cash within a week of delivery. No credit whatsoever is being extended on equipment--with the upside that everything is radically slashed in price. This is the microcosm, but it's the same in the big international picture--credit is not moving at all--the pyramid scheme has folded.

Having said that, it's the first day of the 21st century.


Brad.


Brad,

You're in serious danger of becoming quite eloquent in your dotage, and
also accurate. It's a whole new world out there, and there are some
very bad aspects to that, and, let's hope, some really good bits to come!

The economy is seriously in the toilet, but after the toilet comes the flush!!

Tony