Fr0m: Thursday, August 09, 2007
Re the "gut of the beast"In banks we trust is the basic mantra of the existing version of the capitalist system.
It looks like that to deal with infamous by now "sub prime" crisis the policy makers in the US and Europe are doing a variety of things. One of them is to fortify/shield/protect the banking sector, a core element of the system, from a potential real or psychological fallout from the sub prime crisis.
Thus, on Thursday, the European Central Bank (ECB) said that it had moved quickly to "pump" 95bn Euros into the Eurozone 13's banking market, in the form of loans, an offer that was taken up by 49 banks and other financial institutions! Is one to assume that all these have important effects on the portfolios due to defaults in the US sub prime market?
To what extent did these high risk instruments penetrate or spread throughout the global financial/investment/banking/money system?
How much of the total portfolio did these high return high risk tools represent? And what is more, why? Is/was the financial world short of other "lucrative" investment opportunities? Was the inherent/expect risk of the sub prime not taken into account? These are IMO the tough questions about the state of the global capitalist and financial systemics in recent years!!!
The unusual move is the ECB's single largest intervention in the banking sector since the immediate aftermath of the 9/11 attacks on the US in 2001.
I am as capitalist as anyone, but these things do cause me major concerns not about the sub prime issue or its effects, but mostly, from a systemics and macro/global point of view about the current state of the fin/econ/social/political system as a whole.
Are we in need of a Capitalism 2008++ Release (ie new version)?
One that takes care of the bugs of the existing one and maybe introduces a new foundation, eg human capital?
Just a thought!