Friday, March 06, 2009

A Sinking Feeling

Latest news indicates US Treasury Secretary is failing to staff his Treasury taking up senior positions. One withdrew her candidacy to be his deputy and another didn't even want to be considered to become the underscretary of international affairs. These are the most senior and critical positions after Geithner's own.

If we are charitable we accept their word at face value: personal reasons.

However, there are at least two perfectly logical ones: one is they don't want to be associated with what is clearly a failed economic "policy", the works of Summers/Geithner/Bernanke to restructure Wall Street. Paul Krugman's column in today's New York Times: The Big Dither says it all.

We don't have the luxury of dithering. The world economy is one step out of the cliff, the financial markets are tanking daily.

It does not require advanced economic training to understand what's happening. Banks are insolvent. Their leaders who bankrupted the banks don't want to be thrown out of work by refusing to come clean to the public with the actual state of their respective balance sheets.

US government is amazingly unwilling to clean them out and take over the banks to instill credibility and liquidity.

No one trusts each other out there. It takes a failed banker to recognize another. So, no one is lending to each other. Everyone on Wall Street privately knows the 'other' is a failed bank. Yet publicly every banker puts up a brave front.

Let's face the obvious. The new economic Obama team is not up to the job. Wall Street bankers are still playing them for fools. Yet Obama seems blissfully oblivious to this game.

Until and unless Summers/Bernanke/Geithner make an about turn or are fired for their incompetence, I say US market is still a screaming short. The Dow Jones index is headed for 5000.

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