Risk Rap

Rapping About a World at Risk

In The Hall of the Mountain Kings

The tenor of this years Davos Conference is markedly different from years past. As recently as last years gathering of the worlds power elites, the agenda of the annual World Economic Forum was keen to address the smoothing over the rough edges of globalization in a post scarcity world. Those rich in capital, ideas, power and connections assembled to devise solutions to the worlds dilemmas with the practical medicine of enlightened capitalism. The weltanschauung from the halls of these mountain Kings and Queens has drastically changed with the turn of the year.

Gone are many of the deep pocketed investment bankers who in past years underwrote elaborate banquets and soirees to curry influence and to woo favor with the potentates of power. Gone is the insatiable appetite of the American consumer market that drove much of the conferees suppositions of the sustainability of a healthy global economy. The American consumer now lies prostrate like a Jolly Green Giant coated with an overdose of pesticides by a mad Iowan crop duster. Gone is the confidence of those who believed American pronouncements about the sustainability, soundness and correctness of its economic policies. Gone is a concerted spirit of cooperation among the nations and a belief to work together in a cooperative spirit to solve the problems that acutely ail the global economy. Unfortunately the ghosts of economic deprivation, acute political conflict and social dissonance still freely roam and continue to haunt the exalted halls of the mountain kings.

You Tube Video: Apocalyptica, Edvard Grieg’s, In the Hall of the Mountain Kings

Risk: economic, political, social

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January 29, 2009 Posted by | classical, economics, politics, sustainability | , , , , | Leave a comment

Another Monday Morning Fire Drill

The historic actions and non-actions by the Fed and Treasury Department continue the accelerating velocity of change in the global banking system.

The decision not to rescue Lehman Brothers was a sign of confidence in the capital markets. The acquisition of Merrill Lynch by Bank of America was a dramatic shattering of the last vestiges of Glass-Steagall Act prohibition of FDIC insured commercial banks owning investment banking institutions. This also represents a radical reconfiguration of the US and global capital markets industries.

Dow constituent AIG and its $1 T balance sheet has been a capital market problem child for the past few years. AIG has been mired in scandal for price fixing insurance premiums, accused of poor governance controls and the market has been critical of AIG for the unmanagability of its business units and the ballooning portfolio of its credit default swap and other risk transfer products correlated to the credit markets. It is seeking a $40 B bridge loan from the Fed to shore up capital while it seeks additional infusions from investors to avoid a credit downgrade by the major credit rating agencies.

The Fed also hinted about the creation of a special solvency fund of pooled assets from SWF, private equity providers, governments and other institutional investors. Perhaps this is the pool that AIG will dive into for its bridge loan?

These are incredible developments and our regulators, governmental institutions and industry executives are doing their best to manage this crisis. They are walking a fine line inching towards the precipice of where free markets and a managed economy intersect.

WOW. Is our hair on fire?

Music: Edward Grieg, In the Hall of the Mountain King

Risk: free markets, banking system, Glass-Steagall Act, Federal Reserve,

September 15, 2008 Posted by | banking, classical, credit crisis, regulatory, sovereign wealth funds | , , , , , , , , | Leave a comment