from the hip

Citibank (or Citigroup Inc.) is in trouble. Over the last year, its stock price has dropped from above 30 dollars to less than 4 dollars (3.77 at the close of NYSE today). Its value has been in free fall the the whole week, despite attempts by the bank to shore up it stock prices by asserting its value. Times writes:

Citigroup was the world’s biggest bank until February, when it was overtaken by the Industrial and Commercial Bank of China. Citigroup is now only the fifth-biggest in America, after falling behind US Bancorp, a Midwestern commercial bank, this week. Bank of America is the largest bank in the United States.

By now, this kind of rapid decline in value is a story we have seen before. We saw it with Lehman Brothers. We’re seeing it with GM and Chrysler. And others. in fact, in quite a few other cases.

And now the question is: Should government bail out Citibank or let it slide? The proponents of a rescue operation say that Citibank it too big, one can not let it fall. And they point out that if Citibank goes, the banking system will fall. And we have heard all those arguments before. We have, in fact, heard them every time there is a government bailout. As well, we have heard them repeated over and over by lobbyists for all those industries allegedly needing a bailout. (Just so that it is said, I have nothing against Citigroup, nor do I own or have traded its stock. And the argument I am trying to make is more general and applied to a large number of corporations, and not only to Citibank.)

But does that make the statement true? I think not. First, there is a difference between a bank and a system of banks. Letting a bank fail (Citibank has a positive cash flow, so it may not fall, but that’s not the point here) may actually strengthen the system of banks, as the bankruptcy process will weed out the gold from the dirt and clean the system of debris. As well, three Detroit car manufacturers, unable to cope with competition and having lost marked shares for 20 years, do not constitute the car industry – not in the world, not in America.

All those attempts to equate individual members of industries with the industries themselves are seeking to establish false identities between entities that simply are not identical.

The real question, to my mind is: If this depression is as deep as or deeper than the crisis in 1929, does the American government – or any government for that matter – really have the resources it takes to bail out every business deemed to be strategically important over the duration of this crisis? I think not. Not if government is also to continue to attend to its (their) core business – to provide regulation, defense, social services, health care, and all those other businesses.

This, I think, is likely to be the right perspective in which to view government intervention at this stage. And, if I am right, shelling out huge sums on failing businesses may reduce the ability to act in the future, possibly for greater benefits and facing even tougher challenges. And maybe, just maybe, the crisis is as much a political crisis – involving politicians and regulators in panic, deepening the crisis with every move they make – as a financial and banking crisis.

New York Times just reported the oil prices has dropped to under 50 dollars a barrel for the first time in 22 months. NYT writes:

The drop in prices comes as stock and bond markets fell because of fears about the health of the financial system, and a flurry of new indicators showed how badly the economy was faring.

Just as a booming global economy had steadily driven up commodity prices for six years, the current meltdown means the world needs less oil, and is sharply driving down prices.

It is a stunning — and sudden — reversal that has taken aback many experts. Oil futures on the New York Mercantile Exchange fell $3.04 to $50.58 a barrel in morning trading. At one point, crude oil was down $3.71, to $49.91 a barrel. Oil futures have lost more than two-thirds of their value after settling at a peak of about $145 a barrel in July.

Some analysts predict oil could fall to $30 to 40 a barrel as the world economy worsens.

Also, the dollar is for the moment strengthening in international markets.
Another sign of the strength of the oncoming depression?

See also: Times: Shares fall as US jobless adds another 542,000

Telegraph (newspaper, UK) reports that increasing numbers of middle-aged men are going off sex, according to relationship experts. They report it is an universal trend, but I suspect it may only be a British trend:

Counselling and sex therapy charity Relate says it has seen a 40 per cent increase in men who simply cannot be bothered to make love to their wives and partners.

The findings are a world away from just ten years ago, when hardly any men contacted them with a loss of libido. The main sufferers who call its helpline with the problem are generally aged between 30 and 50 and are married.

Peter Bell, Relate’s head of practice, said: “Men used to come to us with impotence – now known as erectile insufficiency – but Viagra has sorted some of that problem. What we have is a lot of men who say, as women did in the 1950s: ‘I can have sex but I do not want to. It’s not rewarding’.

An English professor thinks he has the explanation:

Professor Michael King, of the Royal Free and University College Medical School in London, has completed a study into mental illness across six countries which found that the rate of major depression and panic syndrome was highest among men in the UK.

I am not able to question his conclusion. But I do feel sorry for all those beautiful, attractive, suffering English ladies out there. And I feel confident that there must be men, somewhere within the common labor market of the EU, who may be convinced to move to the UK to help them out.

After all, there must be lots of fun to be had in the once Great Britain these days. And if the natives are not willing to do it, somebody has to…

Awaiting your mail, ladies!