This is just a quick thought. Awhile back, I had wondered where/why Kanjorski made an offhand comment about the Money Market accounts being drained of 550+ billion dollars. After looking around, I couldn’t come up with anything that wasn’t reported and I put the issue into the “look deeper” category. I don’t necessarily want media reported information because it isn’t necessarily what is truly happening. And the issue of draining money markets still bothers me because people telling me it was simply a run on the sector, like a bank run before the Great Depression, is too easy a way out.
I was sent these links regarding the matter, but I wasn’t given permission to disclose who gave me the links, and I didn’t really ask either:
The Economist speaks of the matter in terms of the collapse of Lehman Brothers and the run at the funds it held. Why some could make this move with such unity is amazing, and I’ll get into this discussion later. While this PDF speaks to the Temporary Gaurantee Program to protect investors, which in my opinion violates the spirit of moral hazard. This Press Release from the U.S. Department of the Treasury also speaks of the TGP. As far back as this run goes, the Fed said that it would expand emergency lending to cover asset backed paper, however, a large segment of the debt that is causing the issue is not asset backed toxic paper that was sold in stepped tranches based on risk. With the total value of the world economy somewhere around 250 trillion dollars, the GDP is a fraction of that amount which is bad, creating a debt ratio of 3 or 4 to one. Depending on who you talk to, I don’t normally end with a Wikipedia entry, but the entry for World Economy is a good place to start digging around. At any rate, during the money market run, additional investment groups such as Putnam Prime Money Market Fund, and other funds, closed, furthering the decline even after the $550 Billion decline in less than 3 hours as Kanjorski mentioned.
(edit): I’ll say it again… just because you say it, or write it, doesn’t make it true or ethical. More to come…