A Boobie Based Economy

The Friday Boobie reacts to today's economic news.

Can It Just Keep Getting Worse?

Fan, meet shit. Shit, meet fan. From this morning's news:

BEIJING, Sept 25 (Reuters) - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.

The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries.

While I'm not eager to see the economy meltdown from the Big Shitpile into...um...a steaming lava-like mass of shit, and I completely oppose the 700 billion 1.2 trillion 1.8 trillion dollar bailout (and counting) I cannot for the life of me see that this is going to help.

Of course, Wall St. rejoices now that you and I are on the hook for that money.

UPDATE: As of this afternoon, Reuters has released a new article here, which softens the tone of the original somewhat to make it sound as if we are still trading with Chinese banks, but just that American financial firms are having minor difficulties:

U.S. and some other foreign banks were finding it more difficult to borrow money from the market because of concern about the health of the global financial system.

Some Chinese banks have temporarily stopped offering new lending to U.S. banks, in yuan and other currencies, three traders said.

However, they said foreign banks were not being excluded from trade completely and that the market was not panicking.

However, the South China Morning Post sounds a little more ominous below (sorry no link, but I'm not subscribed to the SCMP). The timing of these articles seems really suspicious and I wonder if they are just added pressure on Congress to pass that f*cking bailout plan....

Mainland lenders ordered to halt interbank deals with US firms
Jane Cai and Adam Chen in Beijing
Sep 25, 2008
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Mainland regulators have told domestic banks to stop lending to United States financial institutions in the interbank market in a bid to prevent possible losses during the financial crisis, industry sources said yesterday.

The ban from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to US banks but not to banks from other countries, a source said.

The CBRC was not available for comment yesterday.

The decree appears to be Beijing's first attempt to erect defences against the deepening US financial meltdown after the mainland's major lenders reported billions of US dollars in exposure to the credit crisis.

Lending transactions on the mainland interbank market totalled 10.65 trillion yuan (HK$12.17 trillion) last year, according to the People's Bank of China.

In the first eight months of this year, transactions totalled 10.11 trillion yuan, up 104 per cent from a year earlier.

At the end of last year, the mainland interbank market had 717 members, including banks, securities companies and trust companies.

Another banking source said the CBRC issued the ban after obtaining data about the exposure of mainland banks to bonds issued by bankrupt Lehman Brothers Holdings.

Top officials said they were keeping a close watch on the crisis and warned mainland financial institutions to be cautious in their daily business and overseas expansion.

"The international transaction volume of Chinese banks is not big. Those concerning subprime loans are probably lower than US$10 billion," deputy central bank governor Ma Delun wrote this week in the China Business Post, a PBOC-affiliated newspaper.

But the deteriorating situation in the US has shocked top officials.

Mr Ma said that among the unexpected developments was the effect the crisis was having on normal assets, not just problematic assets; its impact on the whole credit market, not just single products; and its effect on Europe and other nations, not only the US.

The exposure of seven listed mainland banks to bonds related to Lehman Brothers totalled US$721 million.

Mainland banks had US$9.8 billion in exposure to US subprime loans at the end of last year and US$25 billion to Fannie Mae and Freddie Mac by June 30.

More as it unfolds...

The Future's Not What It Used To Be

Having ruined everything he touched during his time in office, Shrub is now decimating the next administration, no matter who wins in November. The current Wall Street bailout proposal will balloon the deficit to such an extent that the next president will enter office with their budgetary hands tied by an empty treasury. Forget any new spending on social programs such as health care; that money is already being stolen.
My paranoid side is thinking that this is the republican plan to destroy an Obama administration before he even gets elected. The corporate greedheads see him coming, and have decided that they better steal the nations wealth now, before Obama has a chance to use it to promote the common good. If they don't steal it now, they might not get another chance. As the dollar drops in value, it takes a lot more of them to buy a yacht or a private jet. If that same money were to fall into the hands of working Americans, they're likely to spend it in ways that don't enrich the already wealthy, and the republicans wouldn't want that to happen. Obama might even encourage a functional social economic system that helped average people, and that would be a threat to the oligarchy. In fact, it would be their worst nightmare.
Even before this latest economic "crisis", Sweaterman and I have discussed the mess that will be inherited by the next president. Sweaterman has even gone so far as to suggest that we let St. Sleazy McCain win, in order to permanently destroy the republican brand of economics. While I don't agree (the consequences of such a disaster are too painful to contemplate), I do understand the sentiment. Obama seems like a genuine 'nice guy', and it would be a shame to have him end up taking the blame for the consequences of the republicans corruption. The deck is already being stacked against him.
I suppose there is one positive side to all of this: should McCain win, he'll find it very difficult to afford more wars.

Added: Obama seems to have noticed:

WASHINGTON — Barack Obama said Tuesday that the huge costs of a financial bailout meant that he probably wouldn't be able to deliver everything he was promising in his campaign, at least not as quickly as he'd hoped.
"Does that mean that I can do everything that I've called for in this campaign right away? Probably not. I think we're going to have to phase it in. And a lot of it's
going to depend on what our tax revenues look like," Obama said on NBC.
The Democrat didn't identify which proposals he might delay if the government spends up to $700 billion to shore up the country's financial system, as the Bush
administration has proposed. Congress is negotiating the terms of the bailout this week in hopes of completing action by the weekend.

http://www.mcclatchydc.com/251/v-print/story/52949.html