2008 – IV

October came, and, being the last month of university, I expected a very busy month of assignments. What I got was beyond my anticipation – a lot of work, a lot of rushing, and a lot of headaches. I had to write well over 20,000 words of assignments, one finishing up being 60 pages due on the same day as one that ended up being 50 pages. And both of these were handed in only 2 days before my first prac. in school started (more on that later). I had a unit’s planning done on ‘Belonging’ and a presentation on ‘the Boys’ Crisis’ all on top of my assignments. To say it was a hectic month for university would the a huge understatement. Mopre evidence of this, I still didn’t have a chance to catch up with any of my friends. Probably a testament to my character and ethics, I didn’t cut back on my work hours. It was a bit of a gamble, but I was pleased with my results, so I guess I held up alright.

Because of all this, I had very little time to prepare for prac., my first teaching experience in a school proper. It began on the 27th, and I had no real idea what I would be doing other than what I had picked up in a pre-prac. visit earlier in the month. I knew I’d be teaching year 8 history, the topic of Native Americans and colonial contact, and year 8 English, with no topic or instructions from the teacher whatsoever. I still wish I had more time to prepare for it, but, as I said to some people after the first week, it would have been all thrown out the window anyway because most of the stuff I did prepare more than 2 days in advance would often change to such a degree that no planning would have been better. I’ll reflect more on prac. in the November section, seeings that’s where bulk of it occurred.

I was glad to still be working as much as I was. It probably put me in good step. There was staff shake-ups and the 2 most senior (in terms of time worked there) employees were given the book, leaving me as a) the longest serving employee; b) the most experienced employee, and; c) the only staff member left in the pro-shop. I had been looking for a way to maximise my hours worked in the restaurant (as I get paid more there), and came to the realisation earlier in the year that I would have to leave the pro-shop to do so. With the shake-up, I thought it would be a good time to suggest it. It turned out that the manager, after watching my performance over the part (near) year, wanted to promote me from my position as a worker in the two places, to a more senior, title position in the whole running of the golf course. Primarily, I would work in the restaurant, with my responsibilities there enhanced and enlarged, but my position would also include liaising between the pro-shop (without working in there), and with it the running of the course proper, and the restaurant. They were happy if I didn’t take it, knowing that I was only a casual worker and that it would put a bit of a strain on my university work. But they also said that if I didn’t take it, they wouldn’t be offering the job to anyone else – that the position was being made for me or no one. I thought about it, weighed up the pros (looks great on my CV, gives me heaps more experience, better money, more money, better position) and the cons (more time needed for it, changes the dynamics, more responsibility, probably more stress), and ended up taking the position. I would begin proper after my prac. in November. It would turn out to be a great move, and a very rewarding one. As people know, I’m a very studious worker, and that it would end up demanding of me (by my choice) 28 full working days (where a full working day for me is a 12 hour shift minimum) from the 29 days we were open in the coming December made me very happy.

Just a few final notes on my personal life in October: I turned 22, and for all intents and purposes it was uneventful (it was a Wednesday, and university was taking up my time); a person I met on Contiki came up to Sydney from Melbourne to visit the last 24th, and I went out with her and other Contiki members in Sydney on the 25th for a great night out; the girl and I managed to have quite a good month of friendship between us, though, looking back now, that was the last time that we actually had a good time together; I wasn’t able to keep in much contact with my friends through the month, much to my displeasure, and; my blogging died down to minimal, also to my displeasure.

US politics now, and the campaigns were in for some trouble. Obama, riding the wave of success he gained from McCain’s failed attempt  to take the economy as his own, now had to roll out some policy to match his rhetoric. It took a little longer than expected (I suspect because he wanted  to get the details 100% correct), and he lost a bit of the momentum there. But for McCain, there was no getting up. He had made one too many gambles after the other. First he gambled on Obama and Clinton hurting each other to the point that he would walk through the election – it didn’t happen. If anything, October showed signs that the opposite had happened – Hillary and Bill were both out and about (particularly in Florida and Pennsylvania), campaigning hard for Obama. It looked like the two had mended fences, finally. The previous 9 months were out the window, and they were in it together now.

McCain’s next gamble, Sarah Palin, was going up in flames. A Katire Couric interview with Palin (and Couric is like being interviewed on Sunrise here) revealed how bad a choice Palin was. She said that her foreign experience credentials were boosted by being governor or a state near to Russia. She said, when asked to name newspapers she read, that she read ‘all of them’. Her attempts to talk policy were pathetic. She couldn’t name another Supreme Court case other than Roe v. Wade. To boost all this, she was being ridiculed by near-on every TV show – SNL at the front – and her performance at the VP debates was confused and boring rhetoric.

McCain’s final chance to fail, and fail he really did, happened when he (well, he didn’t directly do it, but 527’s that he has more control of than he lets on did it) injected Rev. Wright back into the campaign. The nation turned their backs on him – he had been dealt with … twice. They were past politics like this. The country was trying to show (and come November, would show) that they were beyond the Republican’s tactics of the past 8 years – of fear and gutter politics. Obama, in his retort, brought to the front and issue little talked about: McCain as part of the Keating Five. The Keating Five traces its roots back to the 80’s, and economists were saying that the fiasco that was part of the Keating Five caused the subprime mortgage crisis that triggered what you read about in September and will read about below here. It killed McCain’s campaign. Absolutely killed his campaign. The people were unimpressed that even Obama had resorted to attacks, but they indulged him this once.

By the close of the month, and oh-so close to the election, Obama had streaked ahead. Observers like me, who were watching the state-by-state evolution of the race, could not see a way for Obama to lose. Pundits and observers who had been watching the national campaign still maintained it was a close race. I knew it wasn’t going to be close in the end, and I was sure of it by the end of November.

Australian politics was dominated by Australia’s reaction to the financial crisis. It had seemingly caught up to us early in the month, though the ‘catch up’ can really be traced with this simple statement: when I went to the US in July, the Australian dollar to US dollar exchange rate was 98c – near parity. By October, it had falling into the 60 cents area. The US economy was retracting, and with it foreign investment. The Australian economy had to deal with this, and it was up to the Rudd government. With Malcolm Turnbull leading the opposition, a strong economics man, I was slightly worried that they would make serious ground against the government. They didn’t. Kevin Rudd acted quickly and effective. His immediate reactions, while not accurate or broad enough to cover every base immediately, was enough to abate more serious economic problems – like those we are seeing in the US. Eventually, when everyone had a chance to stop and take a breath, the ‘on the run’ policies that were drafted were polished and completed for a more long-term and resounding effect on the economy. I liked this approach, I thought it did its job, and I thought it was what was needed for the time and demands. The opposition tried to make ground out of it, but it failed miserably. As the economy began to recover itself (slowly, and it will take longer), Kevin Rudd’s approval numbers soared and Malcolm Turnbull’s plummeted. It seemed that the negative perception that Turnbull had always had to battle in the public’s eye had caught up to him at the same time people were struggling to understand why he was saying the policies Rudd was bringing out were bad when they were obviously succeeding.

Now, returning to the worldwide financial crisis. The economic meltdown didn’t just occupy Australia’s mind – it held sway all over the world. The recap what happened, and where we were, check back to part III. Not to give the impression that anything stopped, or the crisis paused, I’ll just get straight back into it. On the 1st of October, the Senate passed HR1424, the $700 billion stimulus package. The House, two days later on the 3rd, passed the same bill, after debating the ammendments that the Senate had slapped on (like business tax cuts and alternative energy breaks), and the Emergency Economic Stabilization Act of 2008 was born. On October 2nd, Greece, following Ireland’s lead, guaranteed all banking deposits – and effort to calm down domestic investors as well.

Much like the debate that raged between Rudd and Turnbull, the same went through Britain’s House, and eventually their financial guarentee of deposits in banks to £35,000 was raised to £50,000 – partly due to the number of people covered, also due to the fact that the investors and markets hadn’t calmed as much as was anticipated. This announcement was made on October 3rd, and would come into effect October 7th. Also on the 3rd, the Dutch government nationalised the institute of Fortis. Back in the US, and eventually would spread around the world, people started to ask the questions ‘How?’ and ‘Why?’. Most analyst pointed to one reason: the subprime mortgage crisis, beginning in 2005/06, but dating back to the close of the 20th century. Other analysts, particularly those outside of the US, or labeled ‘left win’ inside the US, said that deregulation, and a serious lack of, was to blame as well. Deregulation, being a trademark of the Republicans, and the mortgage crisis were lumped onto the back of President Bush and his party. There was certainly no saving John McCain from this point, and most people knew it.

On the 5th of October, with a new week starting, a lot of people were shocked to read events that had been unfolding in tiny little Iceland. The value of its dollar, relative to the Euro, had dropped a whopping 30% overnight. While the number itself isn’t staggering (the value of the Australian dollar, relative to the US dollar, dropped 30% over roughly 4 months), it was the immediate drop that caused problems. As a majority of trade occurs in Euros, not Krona, with Europe and Iceland, as well as investment and deposits in its bank, the actual value of investments and deposits in the banks dropped 30% as well. The markets, there, went crazy. The government seized ownership of two of the biggest banks, Landsbanki and Glitnir, the the biggest bank, Kaupthing, was put onto a rescue plan. The very next day, the government put a hold on all trading of stocks of the six banks in the country. When the UK government transferred the running of the Kaupthing e-banking to INGDirect in Britain, Iceland was forced to nationalise the company, and thus the largest 3 banks in the country were owned by the government on October 7th.

On October 6th. BNP Paribas, a French bank, brought out the remainder of the bank Fortis. More countries (Denmark, Austria, Germany, Taiwan ($92,000), European Union (€50,000 per saver), Netherlands, Spain, Belgium (each up to €100,000) followed the paths of Greece and Ireland in guaranteeing bank deposits, or revising up their guarantees, on the 7th. The same day, when even the increased deposit guarantee came into effect, the FTSE100 fell its largest single-day drop since its establishment. In reaction to this, the next day on the 8th, £25 billionwas made available as tier 1 capital (preference share capital) to Abbey, Barclays, HBOS, HSBC Bank, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland, and Standard Chartered. An additional £25 billion was scheduled to be made available to other financial institutions, including British subsidiaries of foreign banks. The scariest part of this wouldn’t be known until December, when it came out that the Royal Bank of Scotland and HBOS were hours, just mere hours, from having to shut down their entire operations and declare bankruptcy before the day was out.

If all  these actions looked familiar, it’s because the US had been crafting the same bill all through December but pussy-footed around the issues in the House and Senate. This was the UK’s own bank rescue package. In Germany, the government also announced a new bailout plan for Hypo Real Estate. Also on the 6th, the Dow Jones closed the day finally below 10,000, a 30% drop from its high, above 14,000, a year earlier on October 9th. World-wide reaction to this milestone was significant, with some countries (like Brazil and Russia) having to suspend trading.

On October 8th, there were big cuts to interest rates around the world. In the big economies, the European Central Bank, Bank of England, and the Federal Reserve all announced simultaneous cuts of 0.5% to their cash rate targets. The same cuts were made by the Bank of Canada, Swedish Riksbank and Swiss National Bank through the day. Locally, the Reserve Bank of Australia cut their cash rate by a full 1%. The Central Bank of the People’s Republic of China also cut interest rates by the close of the day. On the same day, while all  these preventative measures were going on around the world, huge losses on stock markets worldwide were being recorded. In the United States, following the funds cut by the Federal Reserve, stocks were volatile, finishing down – the rate cut did little to drown out the news that the the Federal Reserve was loaning failing company AIG another $37.8 billion (on top of the $85 billion original loan). Again, trading was suspended in some countries, notably for the whole day in Russia and Indonesia. The worst stock losses were to be found in Japan – 9% of the market’s worth wiped off in the single day.

When the news of Japan’s losses made news the next day, the 9th of October (funnily enough, the one-year anniversary of the Dow‘s peak), costing for short term credit went up (meaning it cost more to borrow money for short term capital expenditure (for companies) and investment (for investors, home buyers, etc.)) which saw the stock market fall. On the same day that the Dow had peaked past 14,000 one year ago, it now closed at a five year low of  below 8,600. This was the first time the market had closed below 9000 since August of 2003. While immediate reactions in Europe and Asia led to moderate to minor losses on the same day, come the 10th there were huge losses in both market areas. A casualty to the month’s fluctuations, Yamato Life, filed for bankruptcy in Japan. Russia kept its market closed for trading due to falling commodity prices, and because the parliament was debating whether to lend some of $36 billion to banks that met certain credit requirements. However, because this money was being raised from worldwide oil sales, and due to the price of oil plummeting recently, the available credit was limited and restricted. That piece of information, widely known through Russia, was the reason the markets were closed that day – a piece of panic news if ever there was one. They passed the plan, with first attention being paid to Rosselkhozbank, the Russian bank providing majority of the credit to the country’s reviving agricultural sector.

The big ripples that had emanated from the US, and caused serious problems there, had moved on to the rest of the world. Now there was a chance for the administration to fix what was left. The government, under the Emergency Economic Stabilization Act, planned to reinject capital and funds back into the banks by buying up shares in them – near enough to the nationalisation of the banks that had recently happened in England. The Treasury Secretary Paulson met, on the 10th, with world financial leaders – Wayne Swan representing Australia. President Bush met with world leaders – Kevin Rudd representing Australia – on Saturday the 11th (and nothing says serious problems than when politicians work on a Saturday) to formulate a global response to the crisis. The next day, the 12th, would see the International Monetary Fund and World Bank meetings to figure out what to do as well.

The rest of the world wasn’t going to be distracted by a talk-fest in Washington – on the same October 10th European and Asian markets crashed again – London, Paris and Frankfurt dropped 10% by the first hour of trading, then again when Wall Streets opened again. Why did they crash a second time in the day? Because when Wall Street opened, and the Dow Jones went into trading, it plunged a full 697 points in the first five minutes! When the dust settled, the Dow was at 7,900 – its lowest level since March 17th, 2003. The Dow didn’t rest for the rest of the day either – massive swings the brought it down 600, then up 322, and finally closing the day just (just in the sense that it wasn’t 697!) 128 point down, or a market loss of 1.49% (compare this to the 9% loss that Japan had in one day!). At the close of this week, the markets had seen a loss of 1,874 points for the week. 18% of the market had been wiped off. Again, compare this to Japan’s single day loss. People cast an eye back to the carnage that had been the first half of October – activity like this was expected. After all the institutional problems through September, there had to be a market reaction and correction. It happened alright. In the 8 days of losses, the market was down 40% in value from the record high that happened a year ago. I guess investors weren’t reassured by President Bush’s promise to solve the financial crisis soon. A result of Paulson’s and Bush’s meetings wasn’t what was expected. Rather than the rest of the world taking terms from the US, it seemed that the rest of the world, put out with what the US had caused, dictated the course. The US government would now look to emphasise rescue through recapitalising banks and finances institutes, even the strong ones, for preferred equity. They wouldn’t be buying up illiquid assets. The flavour of the month for the US, after the rest of the world had been rushing to do it because it was the right thing to do. It’s right because it’s quicker, and could be in effect within the month. It would still buy some mortgages held by Fannie Mae and Freddie Mac, but that was of little concern now.

October 12th was a day marked for recapitalisation. The British government was negotiating with Royal Bank of Scotland, HBOS, Lloyds TSB and Barclays about injecting capital into the companies to the tune of £37 billion in exchange for common stock. The negotiations would be successful, and the money would be given to the banks. By the end of the British government’s actions,  they would up owning a majority share in the Royal Bank of Scotland, 40% share in Lloyds and HBOS, had banks cancel dividend payments until full repayment of loans, board members appointed by the Treasury, and limited executive pay enacted. In comparison to the US’s bailout, this looked great and their looked weak and pathetic. European leaders in Paris announced recapitalization plans for Europe’s banks, including continent-wide guarantees on bank deposits for five years. The key point was that European countries would finance their own rescue plans for their own domestic conditions, but in total it would cost €1 trillion. Noway, outside of the Eurozone, announced its own $57.4 billion recapitalisation process. In Australia, and New Zealand, bank deposit guarantees were formally made. In preparation for this, Japan closed all its markets from trading, while the US closed its bond market for the day – the 13th.

The G7 met, still on the 13th, had another talk, and made another pledge. This pledge was to prevent failures like Lehman Brothers, AIG, and Fannie Mae and Freddie Mac from happening – each loss resulting in further loss for finance institutes (a double-banger). But nothing, in terms of policy (like strict regulation, market checks, etc.) was announced nor implemented. But it was enough – the Dow, on the 13th, rose in immediate trading in the day, rising up 400 points. The day saw the trading averages up a whopping 936 points, or a market increase of 11%, The Down closed above the magic 9,000 mark again (9,387 actually). In France, also on the 13th, after an announcement by the government of a €320 billion rescue/guarantee package, the French stock market CAC40 surged 11.18% in just one day’s trading. Germany, not to be out-done, announced a €400 billion plan of their own. Spain announced a €100 billion guarantee for new debt taken on by commercial banks through 2008. Italy pledged to intervene as necessary to prevent any bank failures in its country, arranged for €40 billion in bills to refinance non-collateral assets into collateral, and guaranteed all new bank bonds of up to five year through to the end of 2009. The Dutch government guaranteed interbank lending up to €200 billion, and set up €20 billion to help recapitalize banks and insurers. Hungary, which had suffered bad at the hands of the crisis and was preparing to default on the governmental loans that it had, was saved by the IMF. The government, which oversaw loans and investments in three different currencies (the euro, the Swiss franc and the US dollar – not the Hungarian forint), saw the value of their liquid investments plummet as the value of each currency, relative to the forint, also fell. On the 13th, the Hungarian markets rallied like the rest fo the world, and eased some pressure, but the 30% drop in value since July (think back to Australia and our 30% drop relative to the US dollar and think about how lucky we are being tied to Asia more now, having a regulated market, and riding a commodities boom and not an investment boom) meant that serious damage was done.

Serious movements were being made to fix the mess. And, by all accounts, it looked like it would work. Big steps had been made in the big and medium economies that should prop up world markets for long enough to calm down and bottom out. On the 14th (yes, we’ve only moved forward one day), the US government released a plan to gain equity interests to the value of $250 billion in US banks. Yes, even more nationalisation! Eventually (after much pressuring) Goldman Sachs, Morgan Stanley, J.P. Morgan, Bank of America, Merrill Lynch, Citigroup, Wells Fargo, Bank of New York Mellon and State Street (the 9 biggest banks in the US now) all signed on. The shares that the US government got out of the deal were for a 5% pay, but would increase to 9% after five years. Most analysts agree that before the five years is up, the companies will buy back the shares (when they have the private capital to do so), and the US government will get a paltry 5% return on their investment – or $12.5 billion. Hmmm, perhaps not so paltry. There was a loophole made in the agreement that the government could, if it so wished later on, to buy up common stocks (those other ones were preferred shares), and in this way create substantial profit for the taxpayers whose money they are spending. All this revolves around the theory that if the banks have liquid capital at the levels in which they had prior to the subprime mortgage crisis, they can resume the normal lending patterns that they had between each other and other borrowers.

Think about these big numbers, it seems like childs play to  think back to Australia on the same day, and how the Rudd government announced a $10.4 billion stimulus package – key to it, that pensions, low and middle income earners, and first time home buyers are able to withstand the crisis and economic slowdown. The government also announced it would guarantee all bank deposits for three years, all term wholesaling funding by Australian banks in international markets, and would double the planned level of purchases of residential mortgage backed securities.

The crisis finally caused the first Middle East country to kick into gear now. The United Arab Emirates injected $32.7 billion into the domestic banks, guaranteed all deposits and interbank lendings. Japan, after suffering from those big market fluctuations, attempted to steady the investors by lifting restrictions on companies buying back their shares, enforced disclosure on short selling, and suspended (temporally) sales of government-owned stocks. Iceland, after a three day market shutdown reopened without trading for the three largest banks (all nationalised now).

You would think that after all the actions taken in such short a space of time, the markets would calm down. On the 15th of October, London’s FTSE100 dropped 7.16%, or 314 points, the US Dow fell its largest percentage drop since the 1987 recession, dropping 733 points, with the NASDAQ dropping near enough to 8.5%, and the S&P plummeted over 9%.

October 16th, and the Swiss announced a rescue plan for the banks UBS and Credit Suisse, funding by the government, private investors, and Qatar (of all places).

Over the weekend of October 18th and 19th between President Bush, President Sarkozy, President of the European Commission Barroso, Bush announced on the 22nd that he would host another meeting with financial leaders, this time expanding the group to include G20 countries, like India, Brazil and China. This would come November 15th. Also on the 19th, the Dutch government bailed out ING to the tune one €10 billion. On the 20th, the Belgium government bailed out Ethias to the tune of €1.5 billion. Germany, and BayernLB applied to the government for access to the €500 billion the government had set aside. The Swedish government put out a 1.5 trillion kronor fund for inter-bank lending, and 15 billion kronor for rescue packages and capital injection. Just and Iceland was finalising its national rescue package with the IMF, the Ukraine started up talks for its own. Iceland also got a boost from Denmark and Norway too, while the British government said it would cover losses suffered by British depositors with Landsbanki. Then, to boost up its previous announcement, France, on the 20th also, released a €10.5 billion rescue plane for its six largest banks.

With all this available credit to the financial institutes in the biggest economies around the world, you would think faith in banks would be restored. They still weren’t pleased. Over the week, all the major currencies declined against one-another. Europe suffered, but Asia bore the majority of the backlash. Other than Japan, most of the markets through Asia had suffered relative losses. Investors, waiting for the massive losses that had first hit the US, then Europe, anticipated the volatility and started the ball rolling. On the other hand, the Dow had huge fluctuations in both directions, gains and losses, over the five days, though (of course) it finished the week out with a loss. The yen rose in respect to the US dollar after the Japanese government’s initiatives, and the perception that the Japanese markets had bottomed out. Through the week, Pakistan and Serbia followed the ways of Iceland and Ukraine in applying to the IMF for emergency loans, and began crafting a national rescue package. Soon, keen eyes were on Turkey, South Africa, Argentina, Estonia, Latvia, Lithuania, Romania, and Bulgaria – all were saying they were having problems paying back loans, and may default. Their problems weren’t caused by the subprime mortgages (they didn’t have securities based on property), rather because all these other countries were bailing out banks, and banks had no money of their own, these countries had no one to borrow from.

Proving that investors are both self-centred and ignorant, there were national fears that a worldwide recession was about to come about (hello? had you been watching the past year?) and might even grip the world for time to come (you don’t say …). All this was triggered by Alan Greenspan, whole called the events ‘a once in-a-century credit tsunami’. Gordon Brown didn’t help matters by saying that Great Britain is in ‘recession mode’. The reaction? Worldwide stock market crashes again. When th Dow opened the next day, it fell hard, then fell hard again just before close – finishing the day of the 24th down 312 points. The 7th Asia-Europe Meeting, in Beijing between E.U. and Asian state members, discussed a common approach to the crisis ahead of the November 15th Washington meeting. Nothing real came about from it.

October 26th came and Hungary and Ukraine had tentative deals with the IMF for emergency aid packages. Much of the importance of this was overlooked. If they hadn’t made deals, two entire countries would be bankrupt. Poland released financial figures showing the market value falling 50% for the year. In the Gulf countries, due to a 40% price fall in equity prices, as well as the steep fall in the price of oil, the Gulf Cooperation Council met in Riyadh to discuss a coordinated response to the crisis.

October 27th would prove to be a bad day for Asian markets. Japan’s Nikkei 225 Index plummeted another 6.4% – proving to investors that it hadn’t bottomed out and hitting its lowest point value since 1982. But if you thought this was bad, or the 9% wipe-off that Japan had earlier in the crisis, just you wait for this. Hong Kong stocks crashed through the day, with a end of day market value loss of a massive 12%. The reaction  to this on the Dow was immediate, with a drop in the first hour, but a rally towards the end of the day to finish at only 203 points down. A lot of this was due to a second round of recapitalisation by the US government for 22 banks, kept confidential, to the total sum of $38 billion. The criteria to get funding was strict, with stronger banks getting first preference.

October 28th, and the week before the next central bank meetings around the world. Anticipating big cuts, around the world stocks had big rises. The Dow rose 10.8%, and closed the day over 9000. On the 29th, even with nothing really changing over night except worldwide rallies on the markets, all US markets closed down slightly. Even a reduction in the US federal funds rate, from 50 points to 1 percent, couldn’t stop the fall. Thankfully, it was confined to the one day, and markets were up on the 30th and 31st, seeing out the month. These last two days of rallying meant that the Dow’s losses for the month were held back to just a 17% loss in market value, and 30% loss for the year to date. Also on the 30th, Japan announced another $51 billion economic stimulus package and the Bank of Japan cut interest rates to .3%. Hong Kong and Taiwan cut interest rates as well, while the US Federal Reserve  established a $30 billion currency swamp line with South Korea and Singapore, the Brazil and Mexico.

Going back to Russia to finish out the month, you would wonder if anything even happened there. You saw nothing on the news, and really no announcements by the government. The $50 billion rescue plan that they had drafted through the month came into effect on the 30th, and started to bail out firms that were controlled by Russian oligarchs. How is it that the oligarchs of Russia came to be affected by this crisis? Rather than borrowing for the always-near bankrupt Russia, they borrowed from Western financial institutions. The oligarchs had to put up, as security, portions of their companies (effectively, portions of the Russia country, such are the oligarch’s extent of control). When the institutes started to call in debts, the oligarchs didn’t have the liquid assets to pay. Russia, fearing that Western companies might get control of some of these companies, and serious throw the country into shambles, started to bail out the companies. It turned out that Russia, in trying to save it’s national corruption, sacrificed the worth of millions of investors. The market values in Russia plummeted a massive 70% for the year, also off teh back of the lacking faith in the eruble. Russia’s old way of getting itself out of trouble, selling oil, is problematic as the price of oil has dropped significantly too.

Actually, I don’t want to finish with Russia. I’ll finish on a bit of a high note. JPMorgan Chase, now the largest bank in the United States, closed October out with the announcement that it would help regular Joe Six-pack Americans who had a mortgage by reducing interest payments or principal. They would do this for all homeowners that they had the mortgages of that showed a willingness to repay their mortgage. Following JPMorgan Chase, Washington Mutual, EMC Mortgage Corporation, Bank of America, and Countrywide Financial have all followed suit. The US government, realising the great social cost (which is easily forgotten when we are talking economic losses), has established counseling centers for the troubled areas.

And that was October. Much of the economic crisis happened in September and October, so hopefully I can get in November and December together. Two big months, but without as much to write about. Looking forward to finishing this series up.

Thomas.

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