In Frantic Day, Wall Street Banks Teeter Lehman set to go into insolvency I'm not knowledgeable at all about these things so I have little to add to this discussion, but I wanted there to be a topic on it. To those who know more about this than I do, what the heck is going on? There's a lot of dramatic statements being made today, is the US financial system going to get wrecked tomorrow if Lehman isn't saved?
Lehman is a high profile bank. They lend people lots and lots of money. If they go under, all that lots and lots of money has no backing. LEHMAN + CRASH + ????? = MAD INFLATION basically. Merrill Lynch is a advisory firm, and Bank of America is a bank, meaning they have also lent lots and lots of people lots of money. Merrill Lynch is taking over BoA in order to avoid a liquidation (like what happened to Lehman). Think of it as a bunch of piggy banks sitting on a pillar. They're all full, but the column is wobbling, and the money is no good if it's on the floor. Bear Stearns has already fallen and smashed on the floor. Lehman is about to, so everyone is trying to get their money out of it.
actually Bank of America was going to buy out Lehmon, but bought Merril Lynch instead, Merril Lynch didn't take over Bank of America, BoA bought it for like $40 billion or so. Also, the U.S. Economy is going to suffer a huge downswing I think from what I have been reading lately, where this was actually predicted to happen (not for another 2 years though). I mean, look at Fannie and Freddy, the Lehmon crisis, and Bank of America buying out Merril Lynch. The world has huge ties to the United States, and the whole world is going to be in an inflation soon.
what ive always found strange is how the entire world can go into an inflation. Inflation in terms of what? There's no other comparison.
it's quite easy how the entire world can go into inflation, where things are going to cost a lot more than they do now, or previously have. For instance, China, and Canada are the two biggest investors in the United States, so their value of money is going to rapidly decline as well. China has invested over $1 trillion in bonds to support both economies and Canada has so many imports and exports as it has the biggest trading space in the world with the United States. The United States is also a very western society, so every other western society or who trades with any western society is going to feel an effect of this.
not to mention Wall Street is combined of every international corporation with stocks, so international corporations will feel this, which will effect all the countries they are in.
but i meant it on a much more philosophical level. The very idea of commerce was established by humans, not ingrained into our instincts. It's an institution. How can the entire planet **ck up a man made institution? Doesn't that just change the rules or standards of the institution? The actual paper currency is essentially worthless (the only money actually worth something are coins [actual money]), so it can't be the real value of the money going down, it has to be the determined value. What doesn't make sense to me is how everyone is willing to decrease the assessed value of their currency and plunge the world into an "inflation", when they could just shift the scale down. Make a lower "value" standard.
But you see, that is what is happening. The value of every currency is going to be going down, and the USD will drop even more in relation to the Euro, Yan, Won, Pound, etc... The reason currency values drop is because of how economists believe the future economies will be doing. The better one economy does, the better another does. The reason why it is rare to see Europe to go into inflation, is because so many countries use it. However it can have a backset, for example if one country went to war, and that country had to spend a whole lot more money, the value of the euro all together would drop, thus rising the USD's relation to it.
