FINANCIAL CRISIS SHUTTING DOWN WORLD TRADE-MUST READ!

November 17, 2008 (LPAC)--Cargoes are rotting on the docks around the world, unable to be delivered, due to a lack of financing. The shipping business depends upon letters of credit: for cargoes to move, the shipper needs to know when he puts a cargo on a ship that the buyer at the other end will be able to pay for it, and this is where the banks come in. Banks provide the guarantees of payment through letters of credit and related credit lines, so that the goods upon which the world depends can move. This system has functioned for hundreds of years, but is now breaking down. Due to the collapse of the banking system, banks are increasingly reluctant or unable to issue these letters of credit, and charge significantly more for the letters that they do issue. The result is that an increasing number of shipments are sitting on the docks, in warehouses, or in the cargo holds of ships, orders are being canceled, or not even placed. The global supply chain which connects producers with consumers is breaking, and the consequences will be dire indeed.

The leading edge of this trade crisis is in bulk commodities, which have been hit with a dual whammy of plunging commodities prices and trade-finance shortages. Adding to the difficulty is that many bulk cargoes are financed in dollars, and dollars are increasingly difficult to obtain due to the demands of the multi-quadrillion-dollar derivatives market.

The world depends upon trade, especially during this age of globalization, with nations more dependent than ever upon foreign suppliers for the necessities of life. When this trade slows, people begin to die. When the wheat doesn't get exported, the mills cannot produce flour, the bakeries cannot produce breads, and the stores have no bread to sell. When the iron ore doesn't ship, no steel can be produced, which means factories begin to shut down, and so on, until the entire economy grinds to a halt.

We can live without the derivatives markets, the CDOs, and the other alphabet-soup financial gimmicks, but we cannot live without global trade, and we cannot survive if the supply chain breaks. That means we need a functioning banking system, one which can meet the needs of the population. What we have instead is a system that has failed to the point that it can no longer meet its basic responsibilities, and must be reorganized according to the principles outlined by Lyndon LaRouche.

The consequences of a collapse of the global supply chain would be catastrophic for all of mankind--death, famine, pestilence, the breakdown of civilization itself. The failure to solve this problem, whether by incompetence or deliberate intent, is genocide. The Anglo-Dutch Liberal financial system has failed, and we must abandon it in favor of an American System credit system, quickly

Financial crisis cost moves toward $20 trillion

Financial crisis cost moves toward $20 trillion
Posted Oct 28 2008, 06:27 AM by Douglas McIntyre


No one with an abacus, a calculator, or a mainframe will ever know what the global credit crisis has cost in real money. Lost jobs means lost tax revenue. Lost bank capital means a drop in share values. Government aid must be near $1.5 trillion when the US's $700 billion is added to what all other nations have put in to shore up banks.

The Bank of England reckons the cost of the near-collapse of the financial system is $2.8 trillion. It does not say precisely how it came up with that figure, but in the guessing game that hardly matters.

Looking at the issue from a simpleton's perspective, Citigroup has lost $200 billion of is market cap. The number for Wachovia is more like $100 billion. The loses to Lehman and WaMu shareholders are of a similar magnitude. By these calculations, investors in US financial companies have seen well in excess of $1 trillion go down the drain. Lost jobs are certainly worth hundreds of millions in tax revenue. Most of these out-of-work investment bankers were rich.

The fallen value of hedge funds cannot be tracked, but some of the larger ones such as Citadel are down by several billion. Investors in these firms may never see most of that money back.

The fallen value of real estate due to lack of a real mortgage rescue program must be well into the trillions of dollars, especially if that pool includes housing and commercial real estate worldwide. More liquidity would not have saved the real estate market, but it might have arrested its rapid decline. Banks getting capital from the US government are not lending that out again, defeating much of the purpose.

The Bank of England's figure is probably a multiple of ten times too low. A figure around $25 trillion would be more accurate.