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Non-Cattle Specific Topics
Coffee Shop
Drawdown on 9-18-2008 = $550B
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<blockquote data-quote="HerefordSire" data-source="post: 629321" data-attributes="member: 4437"><p>You have a healthy way of interpreting things. I try to be the same way.</p><p></p><p>I have limited understanding of what exactly happened so I will provide a simple point of view of what could have happened. During the Great Depression, I viewed many photos of people standing outside of banks wanting to withdraw their money. People lost confidence in the banking system. There was no such thing as FDIC insured deposits. If a bank became insolvent, the people that did not withdraw their money, likely lost their money. The slang name for this is a "bank run".</p><p></p><p>With the advent of electronic deposits and wires in recent times, and also the prior establishment of FDIC backing, people have allot more confidence in the banking system. However, according to the article, money markets (short term debt obligations) were being run and not all money market accounts are eligible for FDIC insurance. Even if they were eligible for FDIC insurance, the insurable amount was capped at $100K per account. For an entity to store $1B in cash, it would be extremely difficult to manage because there would be a database of accounts. I remember reading close to this date that at least one, and maybe more than one, money market fund NAV (net asset value) was less than $1.00 per share. This is probably a direct result of the electronic money market run. I have never heard of a money market fund falling below $1.00 NAV per share, until recently.</p><p></p><p>The money was electronically transferred from an American based institution to a non-American based institution (outside the geography of the USA). In other words, the digits were transferred out of the jurisdiction of the Federal Reserve. Someone like Barclay's bank could have started transfers, for example. They are loaded as well as some other English, German, Japanese, and Chinese institutions. They could have easily transferred many trillions of digits outside of our domain in a short period of time. There has been a major disruption in the financial system since around this date. Banks don't trust other banks because they don't know what is on their books. It is very secretive. Noone is going to advertise they are holding a bunch of financial derivatives worth 10% or what they paid because of being highly leveraged in a downward spriraling market, such as real estate traunches orginating on the west coast.</p></blockquote><p></p>
[QUOTE="HerefordSire, post: 629321, member: 4437"] You have a healthy way of interpreting things. I try to be the same way. I have limited understanding of what exactly happened so I will provide a simple point of view of what could have happened. During the Great Depression, I viewed many photos of people standing outside of banks wanting to withdraw their money. People lost confidence in the banking system. There was no such thing as FDIC insured deposits. If a bank became insolvent, the people that did not withdraw their money, likely lost their money. The slang name for this is a "bank run". With the advent of electronic deposits and wires in recent times, and also the prior establishment of FDIC backing, people have allot more confidence in the banking system. However, according to the article, money markets (short term debt obligations) were being run and not all money market accounts are eligible for FDIC insurance. Even if they were eligible for FDIC insurance, the insurable amount was capped at $100K per account. For an entity to store $1B in cash, it would be extremely difficult to manage because there would be a database of accounts. I remember reading close to this date that at least one, and maybe more than one, money market fund NAV (net asset value) was less than $1.00 per share. This is probably a direct result of the electronic money market run. I have never heard of a money market fund falling below $1.00 NAV per share, until recently. The money was electronically transferred from an American based institution to a non-American based institution (outside the geography of the USA). In other words, the digits were transferred out of the jurisdiction of the Federal Reserve. Someone like Barclay's bank could have started transfers, for example. They are loaded as well as some other English, German, Japanese, and Chinese institutions. They could have easily transferred many trillions of digits outside of our domain in a short period of time. There has been a major disruption in the financial system since around this date. Banks don't trust other banks because they don't know what is on their books. It is very secretive. Noone is going to advertise they are holding a bunch of financial derivatives worth 10% or what they paid because of being highly leveraged in a downward spriraling market, such as real estate traunches orginating on the west coast. [/QUOTE]
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Drawdown on 9-18-2008 = $550B
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