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Post by jeffolie on Sept 14, 2007 13:25:35 GMT -6
signs of trouble are already clear Fear is now a reality in the short-term debt markets. The next two weeks may determine how far it will spread in the broader credit markets and how the U.S. economy will fare in the months ahead. Forget about subprime. With billions in asset-backed commercial paper about to expire, the U.S. debt market is facing yet another challenge The shaky U.S. credit markets will face a critical test over the next few weeks, as companies try to find buyers for hundreds of billions of dollars in short-term debt that is set to expire. About $417 billion worth of asset-backed commercial paper is scheduled to come due during the weeks of Sept. 10 and Sept. 17. The signs of trouble are already clear. The asset-backed commercial paper market has shrunk markedly in recent weeks, declining nearly 20% from the $1.2 trillion total this summer. Maturities are also on the decline, dropping from an average of nearly two months to about one month. And average interest rates have risen from the 5% range to the 6% range. www.financialarmageddon.com/2007/09/ripples-upon-ri.html
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Post by unlawflcombatnt on Sept 15, 2007 5:40:29 GMT -6
Hopefully this will put an end to many of the leveraged buy-out deals which create nothing but paper profits--profits from inflating the price and stocks of a company. LBOs usually result in a net loss of jobs.
The "real" economy would be better off of no other LBO ever took place again. Private equity firms and LBOs do nothing but inflate the price of assets, without creating any additional wealth. And they lay off workers in the process.
More fear is more good. The excessive liquidity created by easy credit has done nothing productive for the economy. It's increased profits from business ownerships changing hands, with the newest owner paying a higher price to purchase the business, without doing anything to increase productive output of the company. The focus is on cutting costs, and increasing market price of the asset, instead of increasing production, along with the quantity and value of goods produced.
The drying up of liquidity and commercial paper may be very good for the economy in the long-run, though it's clearly creating some short-term problems. Businesses and consumer have borrowed more than they should have and irresponsibility.
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