Tuesday, February 10, 2009

Sept. 18th

Via Zero Hedge, whose title for this post was "How the World Almost Came to an End at 2pm on September 18th":

"On Thursday (Sept 18), at 11am the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn't be further panic out there.

If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it."


James R Harvey said...

September 18th indeed! That is an amazingly straightforward report (if true). I have a couple of thoughts:
1. Who still thinks we have freedom of the press? On Sept. 18th I'm certain there were videos of fires and mistreated dogs, but was the brush with the end of civilization as we know it reported?
(I don't mean to start a ideological war here. I just find it amusing what is presented as news and what is not. Thank goodness we have the Harvey Blog to report the important news.)

2. Numbers after about a few hundred million have little meaning for me. 5.5 trillion in money market withdrawals--what percentage is that of total money market funds. And, where was the money, which was being withdrawn, going?!

3. I have never been a huge fan of economics, as either a science or an art, but this is fascinating. Analyzing the problem and finding a solution has all the fun of complex philosophical speculation with the benefit that you can actually verify results (to some extent)!

Peter H of Lebo said...

Jim, this may help to shed a little info on the numbers http://www.nypost.com/seven/09212008/business/almost_armageddon_130110.htm (no citations however). Do not know much about the workings of wall street but I am guessing the money left the market and went into the savings of investors (or the investors who were fast enough to sell their shares). The New York Post stated that the withdraw would be about 22% of the Dow, enough to collapse the economy.