You're assuming that the financial system as we know it will come out the other end in recognizable form. There are other possibilities, e.g. broad nationalization of industry. If it's ok to nationalize banks and insurance companies, why not car manufacturers, oil companies, drug companies, telephone companies, railroads...with unpredictable results for common stockholders...
The ongoing tectonic shifts are beyond comprehension. Here are latest topics just from one blog:
The US is considering more drastic measures to shore up the banking system, namely guaranteeing bank debt and removing the ceiling on deposit guarantees... The proposal apparently being floated merely extends out to debt of 36 months and thus appears to be directed at freeing up the money markets and alleviating worries about rolling over maturing debt... Credit default swaps are a significant multiple of the value of underlying cash bonds, and more contracts get written when a credit starts looking rocky... Believe it or not, it is cheaper to insure the debt than pick up the pieces (in this environment) of losses on the credit default swaps... It is horrific that we ever got in this position...
What is going on here? The financial system is on the verge of a meltdown... So Moody's decides NOW to put out a possible downgrade alert for Morgan Stanley?... After their DECADES of being slow to downgrade... Moody's decides to become true believers in timeliness when that can have the effect of driving a knife into the markets and giving a twist?... If an investment bank is downgraded beyond a certain level, counterparties stop trading with it because they will get downgraded automatically by virtue of their exposure...
International Trade Seizing Up Due to Banking Crisis... By way of background, letters of credit of various sorts are essential for trade.... Not only are banks now leery of lending to each other for much longer than overnight, they are also starting to refuse to honor letters of credit from other banks...
Roubini Warns of Possible Systemic Meltdown, "Severe Global Depression"... Even by the standards of his alarming missives, his latest is truly troubling. Roubini effectively says the wheels are coming off the global financial system, and if corrective action is not taken immediately, the damage to the real economy will be extensive...
Rout Continues in Asia... The Nikkei went into free fall after the open, down over 900 points, and as of this writing has staged a minor recovery to a mere 780 points down and is now down 880 from yesterday's close. Singapore is down 7%, Australia 6%. The yen is at 99 to the dollar, and gold is at $928 an ounce...
