Another day of reckoning on the markets, with drops of almost 10% in a single day. Nothing seems to help: the 700 billion dollars plan had little effect, the global lowering of interest rates had little effect, the IMF’s announcing it opens a special department had little effect. It’s not so strange if you think what lies ahead on the markets. The fall of Lehman Brothers alone might lead to 400 billion dollars of insurance claims, which will press heavily on the markets. If these claims will prove to be not payable then it will result not in a win-lose situation but a lose-lose: the claimant wont get any money and the insurance company gets broke.

Compared to the infamous 700 billion dollar rescue plan, which now looks rather meagre if anything, if a single company can produce such giant debt claims, what will happen if other big banks or investment companies start to fall? That’s probably what will happen and it will result in massive amounts of debt the 700 Billion dollars, which would already be used on bad mortgage assets and not on claims anyway, is not an answer to.

These are strange times. There’s the Iceland situation, where the government simply announced it wouldn’t pay back the savings of over 600.000 people in England and the Netherlands. Absurd, but let’s remember that Iceland probably sees itself as the victim here: they invested heavily in the US market and had to take huge losses they could’t afford. However, if things go on like this I wouldn’t be surprised to see the English fleet end up on Icelands shores one day, and maybe they even should. If these were my saving I’d be pretty pissed, I can tell you.

There is more about the 400 billion dollars lehman insurance claim on Robert Peston’s site

M.H.Benders – Dutch writer and Freelance Economist

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