Monday, October 6, 2008

If you think we've got it bad...

... it's worse in Europe.

I'm watching the Dow drop another 700 points today. Things are bad for the markets in the US. Our central bank - The Fed - and the government bailout are doing all that can be done to unfreeze credit in the markets. The risk is banks failing left and right. The risk is also good banks refusing to lend money to even their good customers. That's clearly happening. If we don't get out of this soon we'll be facing a recession worse than any in my lifetime.

BUT, imagine each state in the US having to protect the banks within its borders. Plus, the states have a rule that they cannot exceed a deficit of 3% or their output. If more than one bank fails the state won't have enough money to cover the losses.

That's the current situation in Europe. Each country is responsible for protecting its banks, but unlike our government, they are not allowed to simply borrow more money.

Update: The story above has led to a resurging dollar. (In other words, the world markets are saying, "It's bad in the US... but oh, man, it's worse in Europe.")

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