Warning: Immediate Risk Of Financial Panic

As Bloomberg reports, the FED refuses to disclose the recipients of the last rounds of historic federal bailout money.

Requiring the Fed to disclose loan recipients might set off panic, said David Tobin, principal of New York-based loan-sale consultants and investment bank Mission Capital Advisors LLC.

“If you mark to market today, the banking system is bankrupt,” Tobin said. “So what do you do? You try to keep it going as best you can.”

I take this as a warning that financial panic could be imminent. As we have warned since our article on LewRockwell.com on November 21, 2007 if assets are marked to market the banks are bankrupt and could collapse.

The problem now is that this news could leak out any second. In fact, it would surprise us if it does not. If anyone who has info should happen to read this, we encourage you to leak it – send it to us at info@farmann.no.
We are not certain about panic from the disclosure, but disclosure would reveal that several banks are insolvent. It might trigger a run on these banks, even with federal guarantees. More importantly it will trigger a gridlock on financial transactions with these banks, as anyone who knowingly enters into such a transaction knowingly assumes the risk of the counterparty bank not beeing solvent.
The FED would then have to step up and guarantee the bank outright, all funds, all transactions – everything, in order to keep the system going. That might be a tough call, even for the FED. And in the meantime there might be panic and total gridlock.

If you are seriously worried about this you might consider withdrawing cash outright. Spreading your money on several banks is allways a good idea. In a gridlock gold will fall, but that might be the buying point for gold – as it will rally eventually when the new money flushes through the system.

The DOW has rallied two days in a row. The reversal could be dramatic should it be triggered by a simple leak.

Oslo, Norway. November 25. 2008 Hans Lysglimt

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