Where did the Trillion dollars go?

BendiBus

It's late and I'm tired but if you understand markets then bear with me.

US markets lost more than $1 Trillion today according to Bloomberg TV earlier this evening.

That's $300 billion more than the proposed, and failed, rescue package :eek:

Thought it was an interesting statistic to put todays losses (or the $700 billion rescue package for that matter) into perspective.

It got me wondering where the trillion went.

Someone somewhere was cashing in and I'm sure much of the trillion went into gold & bonds, but surely a lot went into cash? Even a paltry couple of hundred billion? Where does the cash go if not into cash strapped banks?

e.g. I panic and sell all my shares for a hundred million euro. I put it in Bank of Ballyfermot as they're offering 8.1% in a desperate bid for cash. BoB therefore isn't under the same pressure to borrow from Bank of Clondalkin (which is just as well as BoC isn't inclined to loan anything to anyone at the moment).

Or to make my question more interesting, what if I sell my Bank of Ballyfermot shares and lodge the hundred mill into a deposit a/c with them? Their share price has tanked but they have loads of cash now.

Someone put me out of my misery and explain why a stock market crash doesn't alleviate some of the banks problems.

Time Magazine

BendiBus wrote: »

It got me wondering where the trillion went?

Say you have an invention that you want to bring to the market. You sell 10% of the rights of the company for €1m. Accordingly your company is worth €10m. Deadly. You plan with this in your head, make investments, buy a house, hire staff, etc.

Turns out your invention's crap. Your shares are now selling at nothing like they were. Your company is now only worth €1m. Consequently €9m has been "lost". You feel €9m poorer, and so you lay off staff and sell the house etc.

That's what you're dealing with here. Human evaluation, rather than notes and coins. This loss isn't as imaginary as it sounds. I'm a student who's going fairly heavily in debt, in expectation of being able to pay it off. In all likelihood, I'll be able to pay it off fairly easy and all will be well. But if it turns out nobody wants economists anymore (stranger things have happened :pac:) my education will have been a bad investment on my behalf and I'll have debts to pay.

BendiBus

D'Oh! I'd have known that if it was earlier in the day. A trillion off the valuation rather than a trillion cashed in.

I warned you I was tired At least I can sleep easy now.

Time Magazine

BendiBus wrote: »

D'Oh! I'd have known that if it was earlier in the day.

Don't worry, I've explained it to my parents enough times.

I usually finish and Dad asks "So nothing money was really lost?" to which I reply "Sure, if you think you don't lose any money when you're made redundant."

ednwireland

dont know if this is the right place but how come eropean banks are been bailed instantly (just read there about belgian and luxembourg govs bailing some bank to 6.4 billion. how isnt this classed as state aid which the EU normally sticks their oar in ?
seems like one rule for the banks and one for the rest of business
i would like to see the executives and traders of these banks lose their jobs and homes (what did the head of lehmen get a 20 million dollar bonus - shoulda been ajail sentence)

Time Magazine

State aid is primarily a tool of competition policy. This doesn't really raise competition concerns for two reasons. First, it applies to all banks so it doesn't affect any one business. Second, most bets are (quite reasonably) off in the face of a vital industry collapsing.

Idu

ednwireland wrote: »

i would like to see the executives and traders of these banks lose their jobs and homes

Please - crawl back down from the pedestal and stop making such ridiculous statements

ednwireland

the european bail outs dont apply to all banks (the central banks supporting lending does) seems to me the more mismanaged you are the more money you get (seemed to be the basis of the americans bailout anyway) with no comeback wouldnt happen where i work if i make a mess i'm pretty much out - like i say one rule for the banks and one rule for the rest of us.

Time Magazine

ednwireland wrote: »

like i say one rule for the banks and one rule for the rest of us.

I'd say they're more than entitled to whatever they've got in savings but, you know.... :pac:

dotsman

ednwireland wrote: »

dont know if this is the right place but how come eropean banks are been bailed instantly (just read there about belgian and luxembourg govs bailing some bank to 6.4 billion. how isnt this classed as state aid which the EU normally sticks their oar in ?
seems like one rule for the banks and one for the rest of business
i would like to see the executives and traders of these banks lose their jobs and homes (what did the head of lehmen get a 20 million dollar bonus - shoulda been ajail sentence)

Aer Lingus collapsing, although a problem is not a catastrophe.

AIB/BOI collapsing - welcome to the stone age.

Banks are the heart of the economy. Without them, there is no economy (and we're all back to bartering!)

Banks are not just a private business, they are one of the fundamental foundation stones of a nation.

The problems with banks is that, although you can nationalise them, do we really want HSE type banks (ATM's only running for 5 minutes a day, having to pay a €50 fee just to withdraw €20, some dodgy people/businesses lent a fortune, credit-worthy/secure people denied )? Also, nationalised banks are open to political influence (sometimes good, sometimes very bad...)