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Nickelless
Administrator
USA
5580 Posts |
 Posted - 10/11/2008 : 18:12:46
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By Lesley Wroughton and Francois Murphy
1 hour, 57 minutes ago
The IMF warned on Saturday that the global financial system was on the brink of meltdown, while France and Germany pushed ahead with a pan-European crisis response to try to prevent the worst global downturn in decades.
At a joint news conference, French President Nicolas Sarkozy and German Chancellor Angela Merkel said they had "prepared a certain number of decisions" to present at a Sunday meeting of European leaders as they work feverishly to restore blocked credit markets to working order.
The United States appealed for patience, but the International Monetary Fund stressed that time was running short after leading industrialized nations failed to agree on concrete measures to end the crisis at a meeting on Friday.
"Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown," IMF chief Dominique Strauss-Kahn said.
President George W. Bush huddled with Group of Seven economic chiefs and officials from the IMF and World Bank, and said top industrial nations grasped the gravity of the crisis and would work together to solve it.
"I'm confident that the world's major economies can overcome the challenges we face," Bush said, adding that Washington was working as fast as possible to implement a $700 billion financial bailout package approved a week ago.
"The benefits will not be realized overnight, but as these actions take effect, they will help restore stability to our markets and confidence to our financial institutions."
Confidence has been in short supply and panic has swept through global markets, driving stocks to a five-year low on Friday and prompting banks to hoard cash. That has choked off lending to businesses and households, threatening to turn a global economic slowdown into a dangerously deep recession.
U.S. Treasury Secretary Henry Paulson said risks to the global economy were "the most serious and challenging in recent memory."
EUROPEAN UNITY
An emergency meeting of euro zone leaders on Sunday will discuss a bank rescue package, taking a British initiative to guarantee lending between banks as a reference point, a source close to the French presidency said.
France's Sarkozy said euro zone countries were working on a joint solution, but declined to provide specifics. He planned to meet with British Prime Minister Gordon Brown shortly before Sunday's euro zone gathering.
Britain's rescue plan, launched last week, makes available 50 billion pounds ($86 billion) of taxpayers' money for injection into its banks and, crucially, calls for underwriting interbank lending, which has all but frozen around the globe.
Germany was also considering injecting capital into its banks, Merkel said on Saturday.
The world's rich nations vowed on Friday to take all necessary steps to unfreeze credit markets and ensure banks can raise money but they offered no specifics on a collective course of action to avert the recession threat.
In a surprisingly brief statement after a 3-1/2 hour meeting, the G7 -- the United States, Britain, Canada, France, Germany, Italy and Japan -- stopped short of backing the British interbank lending guarantee, something many on Wall Street saw as vital to end growing market panic.
Kenneth Rogoff, a Harvard University professor and former IMF chief economist, said the G7 would have been better served adopting some version of the British plan so that banks would feel confident enough to loosen their grip on lending.
"Saying that they'll take all steps necessary leaves hanging the question of whether they know what is best and necessary," he told Reuters. "It was a signature moment for the G7. I think markets are going to be very disappointed."
European Central Bank President Jean-Claude Trichet said markets needed time to digest a series of dramatic steps taken by world central banks in recent days, including pouring billions of dollars into financial markets and lowering interest rates in the broadest coordinated cut on record.
WORKING AROUND THE CLOCK
U.S. Treasury's Paulson said it was "naive" to think that the G7 would endorse a one-size-fits-all approach to ending the credit crisis because there were major differences between the countries and their financial systems.
He said the Bush administration was scrambling to put together a plan to buy direct stakes in American banks to shore up balance sheets riddled with heavy credit losses from the 14-month crisis that began with failing U.S. mortgage loans.
"We're going to do it as we can do it in a proper way that will be effective. Trust me, we're not wasting time, we're working around the clock," Paulson said late on Friday after the G7 meeting broke up.
But even as Paulson and his fellow finance ministers insisted that they were working as fast as possible, there were signs the economy was credit-starved and deteriorating fast.
The U.S. auto sector has been particularly hard-hit. General Motors has had talks with smaller rival Chrysler LLC about a merger that would combine the No. 1 and No. 3 American automakers at a time when both are struggling to cut costs and shore up cash, according to a source briefed on the matter.
Financial weekly Barron's reported that GM was preparing to approach the U.S. Federal Reserve about borrowing money directly from the central bank because the logjam in credit markets had shut it out of other kinds of borrowing.
(Reporting by G7 team; Writing by Emily Kaiser; Editing by Tim Ahmann)
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jadedragon
Administrator
Canada
3788 Posts |
Posted - 10/11/2008 : 23:21:29
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| Ouch - GM not able to borrow is no good. I own one framed share of GM - hope it does not become a collectable. |
“The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” – George Bernard Shaw.
Why Copper Bullion ~~~ Interview with Silver Bullion Producer Market Harmony
Passive Income blog |
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Cody8404
Penny Hoarding Member
USA
602 Posts |
Posted - 10/12/2008 : 18:13:25
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So much for boosting the "CONFIDENCE," or "FAITH," in Fiat currencies.
If people stop trusting all those little peices of green paper we will be in lots of trouble. |
Awake, O kings of the earth! Come ye, O, come ye, with your gold and your silver, to the help of my people, to the house of the daughters of Zion, to the help of the people of the God of this Land even Jesus Christ. |
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Ardent Listener
Administrator
USA
4841 Posts |
Posted - 10/12/2008 : 18:34:06
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quote:
Originally posted by Cody8404
So much for boosting the "CONFIDENCE," or "FAITH," in Fiat currencies.
If people stop trusting all those little peices of green paper we will be in lots of trouble.
During the last great depression people lost faith in the banks, today with the FDIC that doesn't appear to be such a problem. But today they may lose faith in the dollar and yes, that would be a very serious problem. |
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Think positive. |
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Nickelless
Administrator
USA
5580 Posts |
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Delawhere Jack
1000+ Penny Miser Member
USA
1680 Posts |
Posted - 10/12/2008 : 20:36:44
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quote:
Originally posted by Nickelless
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"I'm confident that the world's major economies can overcome the challenges we face," Bush said, adding that Washington was working as fast as possible to implement a $700 billion financial bailout package approved a week ago.
When he says "we", he means the U.S. I'm not so sure I share his optimism. Prepare for the world to adopt a new reserve currency. I'm betting on the Euro. For all of their socialist tendencies, one thing you've got to hand to the Europeans is that they have not run anywhere near the trade deficits we have.
Any thoughts on other currencies that may replace the dollar as the new standard?
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"Educate and inform the whole mass of the people... They are the only sure reliance for the preservation of our liberty." Thomas Jefferson
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NotABigDeal
1000+ Penny Miser Member
USA
3890 Posts |
Posted - 10/13/2008 : 06:10:58
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Dollar will remain king. Just wait and see. It will take time....
Deal |
Live free or die.
Plain and simple.
"If you love wealth more than liberty, the tranquility of servitude better than the animating contest of freedom, depart from us in peace. We ask not your council or your arms. Crouch down and lick the hand that feeds you. May your chains rest lightly upon you and may posterity forget that you were our countrymen."
- Samuel Adams |
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Kurr
1000+ Penny Miser Member
2906 Posts |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 10/13/2008 : 09:08:21
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quote:
Originally posted by NotABigDeal
Dollar will remain king. Just wait and see. It will take time....
Deal
I know some people that are betting that way and right now they are sitting pretty because of the current flight to the dollar. However, I for one think that it is the wrong approach. Cash is king, but to me that means diversifying into gold, silver, copper pennies, nickels, US dollars, Canadian dollars, Yen, Swiss Francs, etc. Any one form of CASH at this point is just too risky.
I do think everybody should be holding a little cash on hand and watching closing for signs that the US economy has completely seized up (bank closures, credit cards stop working, etc). At the time, you need calmly but swiftly go straight to the grocery store and fill your cart with beans, rice, flour, sugar, cooking oil, etc. IMHO
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Edited by - horgad on 10/13/2008 09:09:04 |
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IMF warns of financial meltdown
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