Wednesday, November 12, 2008

Fact/Parody Jinx Unleashed!

Alphaville might have well cursed this great country of ours:

"By Electric Dragon / FT Onion

Hank Paulson, the US Treasury Secretary, yesterday announced a far-reaching expansion of the Troubled Asset Relief Program (TARP). Everyone would be allowed access to the Federal Reserve’s discount window and the Treasury would, in return, accept anything as collateral.

The latest expansion of the Treasury’s bail-out plan comes as it is clear that the world economy is is trouble."

Read on. I don't blame Electric Dragon, except for his silly name. Dragons are real creatures, not toys. But Alphaville has done us serious damage:

Posted by Don the libertarian Democrat [report]

I’m sorry . This isn’t funny.

From Felix Salmon:

http://www.portfolio.com/views/blogs/market-movers/2008/11/11/who-would-bail-out-switzerlands-banks

“This seems right to me. And also very scary, because of one country: Switzerland.

UBS has a $2 trillion balance sheet; Credit Suisse has another trillion on top of that. Call it $3 trillion between the two of them, which is about ten times Switzerland’s GDP of $300 billion or so. Now that’s what I call too big to save. Oh, and did I mention? At the end of 2007, Credit Suisse was levered by more than 40 times; UBS was levered by more than 64 times. A 16% fall in UBS’s assets would wipe out not only all of its equity but 100% of Swiss GDP on top.

This could be the first make-or-break economic issue to face Barack Obama: if it came to it, would Treasury bail out UBS? I’m sure it would try to get European governments to pitch in too, and the Swiss, of course, to the extent that they can. But I’m sure I’m not the only person praying that UBS never comes close enough to the edge that we have to find out.”

“What matters is the explicit or implicit guarantee provided by the state to the banks to back up their assets and provide liquidity.”

Can we all agree,at least, that these guarantees become explicit and clearly defined? This is beginning to sound to me like Dr. Strangelove:

Strangelove explains the principles behind the Doomsday Device, which he says is “simple to understand… credible and convincing.” He also points out that a Doomsday Device kept secret has no value as a deterrent; the Soviet Ambassador admits that his government had installed it a few days before they were going to announce it publicly to the world, because Kissoff “likes surprises”.

“But I’m sure I’m not the only person praying that UBS never comes close enough to the edge that we have to find out.”

Um, have we implicitly guaranteed the entire banking planet?

Please remember what I call the Fact/Parody Jinx: If you print parody in a factual paper, it will come true. God help you if you’ve unleashed this terrible jinx on my country.

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