-Caveat Lector-
Begin forwarded message:
From: [EMAIL PROTECTED]
Date: July 28, 2007 12:32:34 AM PDT
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED], [EMAIL PROTECTED]
Subject: Fwd: Chrysler Crisis and the Plunge Into Chaos
[In my column I suggested] we drop all talk of the subprime crisis
and just say CREDIT crisis. All eyes would soon be watching
Chrysler's success or failure in raising a mere $US 20 billion.
Chrysler, a company that has never failed a creditor, was turned
down for credit in a world allegedly awash with liquidity.
Chrysler' sent begging signaled the end of an age not just of easy
credit but ANY credit.
Wednesday night the world took a fork in the path to the future
that will see a return to a world that most people alive have never
experienced. A world of hardship, credit squeezes, of long periods
of negative growth and mass unemployment. Of recession and of
depression, busts countering booms. Of older-style economic cycles
that, under traditional capitalism, used to be the norm.
Get a sneak peek of the all-new AOL.com.
From: "Jim S." <[EMAIL PROTECTED]>
Date: July 28, 2007 1:17:06 AM PDT
To: [EMAIL PROTECTED]
Subject: Chrysler Crisis and the Plunge Into Chaos
Reply-To: [EMAIL PROTECTED]
------------------------
"America is a nation founded on the principle that all human life
is sacred...
Destroying human life in the hopes of saving human life is not
ethical."-- G.W.
Bush on the occasion of vetoing Congressional bill on stem cell
research. June
20, 2007
http://www.theage.com.au/news/business/chrysler-crisis-and-the-
plunge-into-chaos/2007/07/26/1185339167308.html
*Chrysler Crisis and the Plunge Into Chaos*
July 27, 2007
Credit, hard or soft, has undergone a day of reckoning, writes
David Hirst.
ON WEDNESDAY night about midnight, Australian time, the world
changed, maybe forever.
I can claim to be engaged in writing what was likely to come over
the next week
when it actually came down. That is, Chrysler came down and with
it the age not
just of easy credit but hard credit.
On Wednesday night the world took a fork in the path to the future
that will see
a return to a world that most people alive have never experienced.
A world of
hardship, credit squeezes, of long periods of negative growth and mass
unemployment. Of recession and of depression, busts countering
booms. Of
economic cycles that have, since the advent of capitalism, been the
norm.
I had begun the column by suggesting we drop all talk of the
subprime crisis and
just say credit crisis. Then, I had intended to quote PIMCO's Bill
Gross at
length following his statement early in the day that all eyes would
soon be on
Chrysler's success or failure in raising a mere $US20 billion.
Chrysler, a company that has never failed a creditor, was having
trouble getting
credit in a world allegedly awash with liquidity. Well, as I wrote
last week,
when the credit tap is turned off, nothing comes out of it. And it
happens fast.
On the very day Chrysler failed to get the finance, forcing it to
go to its banks
-- themselves leaner by the day -- Gross had written: "The price
and terms that
lenders will accept may wake them, shake them, and tell them that
the world has
suddenly changed."
Gross is PIMCO's chief investment officer, which puts him in charge
of almost 900
billion bucks. He is a man renowned for his nous and honesty. He
has been way
ahead on the subprime scandal for months, and carries that gift of
colourful
illusion one often associates with a teller of the truth.
Earlier in the same article, which was to come only hours after the
article
started moving on the blogosphere, Gross wrote of last week's Bear
Stearn fiasco
being the first of many.
That is scary enough coming from one of the biggest fixed-fund
managers in the
world. But adding the lines "lenders have frozen future lending
and backed up
the market for high-yield new issues such that it resembled a
constipated owl:
absolutely nothing is moving" took the cake.
I doubt whether more than a few souls on Wall Street had read his
report and
clearly no one on the squawk box had, but his Chrysler prediction
and his
perceptive prognosis must rank as one of the greatest intuitive
predictions,
based on nothing but pure knowledge of the market, made in recent
times.
The Dow had been merrily advancing as though the previous day's
wipe-out had not
occurred. It passed 100 points on the upside in early trading and
looked well on
the way to erasing the previous day's huge losses. But with the
announcement
that Chrysler could not find lenders, the Dow and the other indices
stopped and
fell. For an hour or so, the thought of the end of endless
liquidity panicked the
market.
But, as often happens at such times, when the plug seems to have
been pulled on
the entire financial system, the buyers stepped in and took the
"deer in
headlights" look from the faces of the squawk box kids.
At the same time, gold, which had been taking a thrashing all day
in spite of the
dollar's woes, went from tail spin to free fall, again something
that seems to
happen at crucial times of great uncertainty. For if anything
truly exposes the
weakness of the dollar and the problems at the core of U.S.
financial domination,
it is the prospect of gold moving up and up and up.
Could, I wondered, the Plunge Protection Team have hit the button?
Who else
would be throwing gold away in the face of a dollar that couldn't
manage to
bounce the cat, and buying enough equity to turn a savage market
around? It is
now fair to speculate that forces that have very little to do with
the free
market are in charge of it. But that is an issue that will win me
no friends and
place me squarely in conspiracy corner.
Indeed, the very mention of the possibility of the Plunge
Protection Team and the
manipulation of gold prices puts me right up there with a band that
subscribes to
the theory that the market is no longer free but subject to
constant intervention
and manipulation.
This is, of course, not fair. I have been a journalist for 30
years and consider
myself beyond cynicism and hardened against all that would explain
things with
the inexplicable -- that which cannot be demonstrated.
Of course, I believe there are conspiracies, such is human history,
but the world
is not governed by them. Moreover, here at Planet Wall Street, we
believe J.F.K.
was killed by Lee Harvey Oswald and are more than happy to argue
the Warren
Commission's case from the point of view of the report. I have
looked hard and
long at those terrible moments in Dallas and arrived at that
conclusion.
But the supremacy of the West is being challenged for the first
time since
Europeans found their way around the Cape and later across the
Atlantic. Great
powers are emerging that would challenge this, and drastic times
demand drastic
measures. Only a fool would believe we will sacrifice hegemony and
go quietly
into history.
~~~
[David Hirst is an Australian journalist, writer, filmmaker, financial
consultant, and investor. His new column, Planet Wall Street, is
syndicated by
News Bites, a Melbourne-based sharemarket and business news
publisher.]
www.newsbites.com.au
Latest related coverage:
* Era of cheap money draws to uneasy end in U.S.
http://www.theage.com.au/news/business/era-of-cheap-money-draws-to-
uneasy-end-in-us/2007/07/26/1185339167245.html
* World Bank chief Australia-bound for A.P.E.C.
http://www.theage.com.au/news/business/world-bank-chief-
australiabound-for-apec/2007/07/26/1185339167263.html
* Booming east to help cushion U.S. house crisis
http://www.theage.com.au/news/business/booming-east-to-help-cushion-
us-house-crisis/2007/07/26/1185339167293.html
Copyright © 2007. The Age Company Ltd.
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