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Interesting this crisis we're seeing in the markets, isn't it? What it is doing is throwing up lots of new terms that, although I'm no expert in financial markets but no numptie either, I had never come accross.

i just did a google news search on Commercial Paper and it looks like it's all kicking off in the market for financial paper. Anyone care to explain why this is so?

http://www.marketwatch.com/news/story/comm...42EAA4AB1932%7D

So far in August, commercial paper has fallen $144.4 billion from the level at the end of July, on track for a record monthly withdrawal in August. The previous record was $78 billion in January 2001.

Commercial paper consists of short-term promissory notes issued by corporations. It's a market that "has shown virtually no tolerance for bad credits or risky entities for more than 30 years," said Tony Crescenzi, chief bond market strategist for Miller Tabak & Co.

I like the no tolerance bit.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

The $1.1 trillion market for commercial paper used to buy mortgages, aircraft cars has seized up just as more than half of that amount comes due in the next 90 days, according to the Federal Reserve. Unless they find new buyers, hundreds of hedge funds and home-loan companies will be forced to sell $75 billion of debt, according to Zurich-based UBS AG, Europe's largest bank.

Squeeky bum time there...

http://www.bloomberg.com/apps/news?pid=206...mp;refer=europe

``From a commercial point of view, it makes no sense whatsoever to continue to struggle on in this market,'' Lindsay Mackay, chief executive of HBOS Treasury Services Plc in London, said in an interview. ``Grampian is one of the premier vehicles; others will be suffering more than we are from this.''

Actually, while looking through some Google news, I came accross this article which gives a good explanation of the whole thing.

http://www.thisismoney.co.uk/news/columnis..._author_id=2025

What's up?

Players in one of the sleepiest corners of the markets have woken up to find themselves in the centre of a media hurricane.

Commercial paper is supposedly an ultra-safe form of corporate debt that matures in less than a year. It has been used to fund a trillion dollars of investments in repackaged mortgages.

What's gone wrong?

Many commercial paper issuers have used cash to snap up securities linked with America's subprime mortgage sector, where billions of dollars of loans are going belly up.

Widespread aversion to subprime debt has meant the demand for new commercial paper has plummeted as investors fly for the hills.

Big commercial paper issuers are having to look for alternative means of raising money, otherwise they could be pushed into asset fire sales.

Sounds bad

It is. The evaporation of the market has put strains on the whole banking system, pushing up the cost of borrowing and adding to the stock market turmoil.

HBOS announced this week that it was having to fund its commercial paper 'conduit' Grampian from its own resources.

Previously Grampian could issue debt on its own account. Analysts fear other banks may have to follow suit.

But this still doesn't explain what the implications are and why it is so bad.

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But this still doesn't explain what the implications are and why it is so bad.

I think it's all in that little phrase "pushing up the cost of borrowing".

Economies and housing markets across the world are dependent on cheap borrowing to maintain investment and house prices, respectively.

Lack of cheap borrowing = recession and house price falls.

Or perhaps you already knew that but mean that the articles don't spell it out for others who haven't grasped it.

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Interesting this crisis we're seeing in the markets, isn't it? What it is doing is throwing up lots of new terms that, although I'm no expert in financial markets but no numptie either, I had never come accross.

The use of jargon to establish a "veil of ignorance".

An easy way to make money from investors who only see huge PAST profits, but who have no idea of any future problems that may arise. It's the very definition of a bubble mania.

What did the investors see prior to August 2007? Huge and apparently still rising profits, along with "minimal" risk (those AAA credit ratings again).

But in August 2007, the veil was lifted, and the unsustainability was clear to see.

The housing markets of the UK, US, Ireland will collapse, nothing can be done to stop that now. Any movement by the central banks on IRs will now be solely to stop the banking system seizing up.

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Interesting this crisis we're seeing in the markets, isn't it? What it is doing is throwing up lots of new terms that, although I'm no expert in financial markets but no numptie either, I had never come accross.

i just did a google news search on Commercial Paper and it looks like it's all kicking off in the market for financial paper. Anyone care to explain why this is so?

http://www.marketwatch.com/news/story/comm...42EAA4AB1932%7D

I like the no tolerance bit.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Squeeky bum time there...

http://www.bloomberg.com/apps/news?pid=206...mp;refer=europe

Actually, while looking through some Google news, I came accross this article which gives a good explanation of the whole thing.

http://www.thisismoney.co.uk/news/columnis..._author_id=2025

But this still doesn't explain what the implications are and why it is so bad.

This thread may be of interest:

http://www.housepricecrash.co.uk/forum/ind...showtopic=54005

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