[FoRK] Oil at $66.86

Strata R. Chalup strata
Sun Aug 14 11:43:02 PDT 2005


The problem becomes one of major financial institution, whose portfolios are in 
many (most?) cases top-heavy with mortgage debt.  It is 'secured' by real 
property, but if the valuation basis for that property is inflated, and then 
readjusts, suddenly you have banks which are shaky.  Those banks depend on their 
overall valuations and ratings to secure prime-rate loans with which to loan out 
money and meet their cash-basis needs.

Stir in the 'fully insured by the FDIC up to $100,000' seasoning, and you have 
some deeply intertwingled deep schtuff going down.  Which is why I have been 
meaning for frack-ever to move some money into euros, and our major investment 
accounts split off from their current home in a primarily US-based firm.  I want 
to shift to a firm like T Price Rowe, which has a US branch but is a Canadian 
firm.  If the US financial structure goes through the wringer, Chinese banking 
investment in Treasuries will bottom out, and the forces pushing for shifting 
the 'petrodollar' to the 'petroeuro' may suddenly get that last shove across the 
finish line.

For all the nonsense about the 'free market' (whoo! but I'm NOT trolling, guys) 
and the ridiculousness of the gold standard, the indisputable fact is that US 
currency has long depended on the fact that world oil is traded in petroDOLLARS. 
  Oil is the de-facto gold standard of the modern world, and in an indirect 
sense the US currency is 'backed' by world oil.  If that shifts to Euros 
instead, whoa doggy.  We gots trouble.

SRC

Russell Turpin wrote:

> "Strata R. Chalup":
> 
>> Fannie Mae and Freddie Mac have been running wild for years, so 
>> various forward-thinking politicians are trying to
>> crack down them.  Problem is, there are some indications
>> of shaky accounting there..  The kind of oversight and investigation 
>> that this bill could trigger could start a panic tumble. ..
> 
> 
> There are some obvious implications of MBOs tumble. Higher
> mortgage rates. Dampened real estate market. But with
> regard to government bonds, will it cause a flight to them,
> or from them? Normally, mortgage rates march pretty much
> in step with long-term bond rates. But would this even be
> different?
> 
> Don't know. Don't know.
> 
> 
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