So, the price of oil had finally come down to under $100/barrel and it seemed like the bank stuff, while bad, was going to be ok. The the banks said, no, just kidding, we’re falling all over ourselves to sell off to the highest bidder, and oil jumped $30 – the single highest increase we’ve ever seen in a day – and the Federal Reserve wants $700 billion USD to do what it likes with.

Everyone keeps saying this is a new Great Depression, and that the end times are near for the US financial sector. I think they forget why banks become illiquid – people think they are. If people think a bank is shaky, they withdraw their money, and the bank becomes shaky. This happened in the late 1990’s with Long Term Capitol Management – they were wildly over-leveraged, and went through $4.6 billion in cash in a few months.

Some of my coworkers here ask what this means for the US economy – and I don’t really know. There are so many pieces inter-connected in global finance that there’s no way to really predict what happens. It’s also going to have a lot to do with how investors, speculators and stockholders react to news on an hour-to-hour basis. Last week’s crisis wasn’t due to loans defaulting. And next week’s crisis will probably have to do more with the human actors than the tangible assets in the system.