Cheap money, an uncontrollable appetite for multi-leveraged, risky debt -- both corporate and mortgage-related -- hedge funds built around exotic financial instruments and financial institutions that eschewed reliable credit standards in a seemingly unquenchable thirst for growth are the elements that have worked in concert to create a level of credit market turmoil not seen since the Great Depression. Even more remarkable is how some of the most respected names in banking and finance fell prey to poor credit judgement. CreditPulse will run a series of articles that takes a closer look at some of the fundamental mistakes that created this crisis and how they can be avoided in the future.
Economists Warn of U.S. Dollar Weakness
Oct. 12, 2009
David Malpass of Encima Global LLC and former Reagan economic advisor Larry Kudlow of Kudlow & Company are starting to sound the alarms of an increasingly weak U.S. dollar. Last Thursday, the dollar fell to its lowest point against the world's other major currencies since August 2008.
"No countries have devalued their way into prosperity, while many -- Hong Kong, China, Australia today -- have used stable money to invite capital and jobs," wrote economist David Malpass last week in a lenghthy Wall Street Journal opinion editorial reviewed by CreditPulse.
Vanguard founder John C. Bogle points the blame for the credit crisis at more than just easy credit, cavalier risk attitudes and complex derivatives. A breakdown in traditional ethical standards and managerial self-interest over company-interest are also to blame, says Bogle.
Stanley O'Neal former CEO of Merrill Lynch, James Cayne former CEO of Bear Stearns and Charles Prince former CEO of Citigroup all lost their jobs within a two and a half month period between October 30, 2007 and January 8, 2008 as the result of overwhelming losses suffered by their respective firms, basically, due to poor credit decisions. Since their departures, Merrill Lynch has been taken over by Bank of America, Bear Stearns by JP Morgan Chase and Citigroup, though still independent, continues to struggle with write-offs and liquidity shortages.
