Monday, September 15, 2008

Lehman, RIP

I don't have too much to add regarding the bankruptcy of Lehman Bros. I'm not sure anyone really knows what the consequences are, but they will make themselves clear in due time. I hope that it shifts the conversation from about "liquidity" to one about "solvency" as that will accurately reflect the reality of what is happening the financial sector. As I've posted earlier, the US has about $6T in losses from the credit bubble, and the question is who will get stuck with the bill. Since various US Agencies are involved, the US taxpayer is a candidate, and I'm sure that banks are aggressively lobbying for that solution.

Currently, money is being destroyed (through the collapse of credit) than the Fed is pumping it out, so the overall economic story remains one of deflation.


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