Wednesday, September 24, 2008I predicted this economic crisis in January and earlier. I said then that there might be another Great Depression. The economic indicators pointed in that direction. I was completely right, and I won't tire of saying so for at least a year.
I just watched Bush's address on the economy. He didn't say anything surprising - though earlier in the day his White House mentioned that we're in a once-in-a-century economic crisis. But I thought the fundamentals of the economy were sound?
The only notable thing about his speech was a constant, muffled oozing noise emanating from the microphone. It sounded like stomach juices churning.
Since I've tried my hand at economic forecasting once before and succeeded, let me lay out another prediction.
Washington Mutual, the nation's largest savings and loans bank, is going to collapse in about a week. Just yesterday, ratings agencies on Wall Street downgraded its stock to an 'E' rating, which is below the 'Junk' rating. It'll likely be taken over by the FDIC as soon as Friday; or it'll be split up among several banks which are looking to buy it out. The latter scenario is preferable. If other banks take over Washington Mutual, there'll be no blood.
If Washington Mutual fails, however, the Virtual crisis which has scarred high finance will spill onto the streets. Bush assured us in his little address that the FDIC has all the banks in America covered, and that nobody has ever lost a dime in an FDIC-insured account. But people, the FDIC is nearly bankrupt. It has only $60 bn dollars on hand to insure the trillion dollars or more in banks' vaults.
In particular, Washington Mutual has 140 bn dollars of insured deposits. If and when it fails, the FDIC will have to make up for an 80 billion shortfall. It undoubtedly will do so by taking out a loan from the Treasury. But before that loan is finalized, and the accounts are transferred to the FDIC, there will be a banking panic in the United States, the likes of which have only been seen in the Great Depression. Thousands or hundreds of thousands of Americans will line up outside Washington Mutual and similar banks like Wachovia to clear out their accounts. Many of these Americans will discover at the bank teller window, after an exhausting wait, that their money is not available.
Then, there will be blood. Good thing I'm flying to Australia tonight. See ya, suckas! And God Bless America.
Posted by Penn @ 6:50 PM | |