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Most U.S. banks were in dire straights and all of the too-big-to-fail banks (the largest banks in the U.S.) were insolvent as a result of the credit crisis that hit in 2008. Both the U.S. Treasury Department and the Federal Reserve (which is run by bankers, essentially for banks) recognized that they had to save the banks at any and all costs - otherwise the U.S. economy and the global economy would collapse into a depression of catastrophic proportions. Money was pumped into the financial system by means of several government and Federal Reserve programs. Interest rates were kept so low that the overnight rate that banks charge each other, which is engineered by the Federal Reserve Bank of New York, was, and still is, at historic lows in the range of 0.00% to 0.25%. With money borrowed at essentially no cost, banks bought risk-free U.S. Treasuries. The banks used the Treasuries they bought as collateral to borrow more money in the short-term "repo" markets. And with those additional borrowed funds, the banks bought even more Treasuries. The interest that the banks collect on the Treasuries created a profitable "interest-rate spread" - the difference between the interest they earned on the bonds they held and the almost-interest-free "loans" they took out in order to leverage their balance sheets. Ok here where the problem start. With borrowed money at technically "zero interest" rate, the banks, fund manager and the hedge fund started to look for "investment" that can maximise their profit. The first to benefit is of course stock market...... That what you have been witnessing so far with QE1 and QE2.... next in line is of course commodity like Oil, Gold etc.... then currency.... that why u see currenct like Australian Dollar and the Brazilian real surge... the next to go up is of course PROPERTY. So the bull market that powered U.S/Singapore/Asia stocks off their March 2009 bear-market lows was the result of the massive monetary stimulus put in place by Washington and the U.S. Federal Reserve. The U.S. monetary stimulus - billions of dollars worth- went into banks and other financial institutions - and not into the economy. That's why stocks have benefited - even in the face of an economy in US which growth has been lackluster, if not downright flat.......... So now you have situation that so called "hot money" is chasing the same thing, ie stock, currency (emerging market), commodity and property.... So what happen. Well the music have to stop.... ie after QE2 was withdrawn, u can see how ugly the REAL economy is, especially in US and Europe.... So the fund manager and hedge start to deleverage... Like I said, first u have situation ALL the hot money chasing the above (until u create a bubble), then u have reverse...... So that what you are witnessing right now...... I may be wrong in my analysis.... Please share your inputs... thanks....

Global financial turmoil MP, I want help with... VIEW FROM THE BOTTOM In these economically troubled times, what does the world look like for the poor man? The New Paper sits in on a Meet-the-People session to find out By Ng Tze Yong October 19, 2008 THE woes from the steel-and-glass towers of finance, from the stock market floor, have hit the heartlands with a sickly thud. GROWING NUMBERS: Volunteer Yit Shue Kee preparing the queue number tags at the Meet-the-People session with Dr Neo. Last year, he saw about 25 people each session, he said. This year, he's easily seeing more than 40, some of whom can be seen in the background. It has reached the meet-the-people session - at Block 4, Sago Lane, in the heart of old Chinatown. The spartan waiting room is full of gloom, with people clutching petitions, appeals, bills. There are stacks of magazines, but no one is interested. It's 7.30pm on a balmy Monday evening, and there are already 20 people waiting to see Dr Lily Neo. She is MP for Kreta Ayer-Kim Seng, part of Jalan Besar GRC, and is due to start seeing them at 8.30pm. 'Six months ago, I started noticing an increase in the number of people coming here to look for financial help,' said Dr Neo, who describes her constituency as 'one of the poorest in Singapore'. 'The effects of inflation and the current financial crisis are more aggravated here,' she said. Half her constituents live in rental flats, the other half in three-room flats, and 44 per cent are 55 or above. How does their world look like in these troubled times? We sit in on her meet-the-people session to see the world their way - from the bottom up. UPSET: Dr Neo talking to a cabby, who's with his Indonesian wife and their 1-year-old baby. He's upset he has been having trouble applying citizenship for his wife. --TNP PICTURES: NG TZE YONG 8.30pm: Gran wants stall back The first case of the night: A granny in her 80s wants her hawker stall back. She agreed to give it up when upgrading works came, and got a $23,000 ex-gratia payment. But she now wants to pass it to her son. 'My son... he's in his 50s,' she tells Dr Neo in Hokkien. 'These days, it's very hard to find a job when you reach that age.' 8.34pm: Ex-homeless man wants to say thanks A scruffy, pony-tailed uncle pops in to hand Dr Neo a thank you card. She had helped the man, who was homeless for a long time due to family problems, find a place of his own. 8.36pm: Man in 70s wants a job A gaunt-looking uncle in his 70s comes in asking for a job. He used to be a dishwasher but is no longer strong enough to carry the heavy plates. Nine months I've been out of work, he says. Children? No, never married, he says. 8.40pm: Ah Pek wants flat POOR AREA: Dr Neo, MP for Kreta Ayer-Kim Seng constituency, describes it as 'one of the poorest in Singapore'. An Ah Pek comes in, asking for a rental flat. He recently got married, for the first time, to a divorcee from China. He can't wait to begin his new life. But he can't afford to rent a room from private landlords and he can't rent from HDB because his wife is not a PR. His wife has a 7-year-old grandson in her care. Her former daughter-in-law left her son and grandson all of a sudden. Will it complicate matters, he wants to know. 8.45pm: Illegal hawker wants to avoid being arrested Man in his 50s tells Dr Neo he feels like he's 'walking alone in the darkness'. He was charged with illegal hawking but failed to turn up in court because he was hospitalised with a bacterial infection that day. Now he can be arrested. He hopes Dr Neo can appeal for him. Please, he pleads, I don't want to go to jail. 8.52pm: Cleaner wants a home A cleaner tells Dr Neo he is homeless. He has lived with a friend and not gone home for 20years because he cannot get along with his wife. Now, he would like a rental flat of his own. 8.58pm: Aids group wants to help elderly A voluntary group, Action For Aids, applies to host an event to raise awareness of the disease among the elderly in Chinatown. There have been recent reports of prostitutes soliciting in the area. 9.08pm: Study mama wants to get PR Study mama from China wants to apply for PR. She and her 14-year-old daughter like Singapore a lot. But she can't cope with the sky-rocketing rent. Already, they have moved house several times. 9.11pm: Residents want rental flats Dr Neo signs some appeal letters for residents hoping for a rental flat. Today, rental flat-related issues make up a third of all the cases she is seeing. 9.15pm: Jobless man wants a taxi licence A man hands Dr Neo a crumpled stack of utility bills. He can't understand why his bills are so high. The 58-year-old, who is unemployed, also wants to know why the Land Transport Authority can't design the tests for taxi-drivers to be in Mandarin. He has driven lorries for 30 years and knows Singapore roads like the back of his hand, he says. But he can't pass the test because he came from a Chinese school. He has wasted months of studying and a few hundred dollars in fees, and is desperate for a taxi licence. 9.25pm: Couple want food vouchers A couple ask for food vouchers. The husband, an odd-job labourer, has been jobless for a week. Dr Neo hands over a $30 voucher. What can we buy with $30, they wonder. But Dr Neo is careful with her generosity. She wants her staff to make a home visit first. 9.33pm: Gran wants money for brother A granny applies for public assistance for her brother, who can no longer work because of old age. But he is not eligible, Dr Neo explains, because he is married (though his two sons don't give him money). The granny is given food vouchers instead. She leaves frustrated. 9.39pm: Woman wants rental flat A woman agitatedly asks for a rental flat. Her flat is under the name of her father, who died recently. She assumed she could continue living there, but now HDB wants the flat back. She is refusing to move unless she has a rental flat first. After the woman leaves, Dr Neo sighs and says it is sometimes tough to match government policies to complex real-life situations. The more you explain, the more upset they become, she says. So now, she focuses on listening and understanding. 9.41pm: They want HDB loan A couple with a baby want HDB to expedite a $150,000 loan to them. Why, Dr Neo asks. The couple lists a host of familiar-sounding reasons - unemployment, bad debt, recession... 9.47pm: Cabby wants citizenship for wife A cabby in his 60s comes in with his young Indonesian wife and their one-year-old baby. He's been having trouble securing citizenship for his wife and he's upset. Doesn't the Government want us to get married and have babies, he asks. Is the Immigration and Checkpoints Authority going to bring in a nanny for my son, since they won't let my wife settle here? Is it because I'm too old to be my wife's guarantor? Aren't old men human too? Doesn't the Government always tell us it values the elderly? He says ICA has advised him to re-apply in a couple of years. Are they waiting for me to die, he asks. 10.02pm: TB patient wants to know why... A tuberculosis sufferer is angry he is being made to go to hospital every day to get his medication. It's standard procedure among doctors, to prevent the disease from spreading. But the man asks: Like that, how to hold on to my job? 10.07pm: Mum wants citizenship for adopted kid A woman wants to apply for citizenship for her 6-year-old daughter, adopted from Batam. Otherwise, she says, I cannot afford her kindergarten fees. 10.14pm: Woman wants cheap English lessons An Chinese Indonesian woman, ditched by her husband of 20 years, wants to know how she can learn English at an affordable rate. She is already debt-ridden and hopes knowing English will find her a job. Dr Neo nods and signs the appeal letter. It's the last case of another long night.

any thoughts on above?

TGIF! Given what's happening with the US economy these days, the Treasury Department has issued a new one dollar bill.........

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