Foreign investors, having been burned by the lies and deception of Wall Street, and Bernanke's desperate dollar devaluation, pulled BILLIONS out of the US last month, and they won't be coming back. And I can't blame them. They bought rock-solid AAA paper, thinking they were buying gold, and instead they found out they bought a pile of choice grade-A US financial crap.
So the big banks set up a $100 Billion SIV fund why? Because no foreign investors will touch this mortgage-backed junk ever again, and they think this smokescreen will help avoid a true mark-to-market. We'll see.
Foreign money isn't going near US asset-backed paper for a long, long time. You can thank Moody's and S&P for destroying the credibility of the US financial markets, and you can thank the foreign investor exodus for taking the US housing and economic collapse to levels not even predicted here.
This is going to get massively, horrifically ugly now. And Bernanke, Paulson and their banker buddies can't stop it. They can only continue the lies and distortion for a bit longer. And then reality will set in.
Foreign Investors Flee Crumbling U.S. Credit Market
IF ANYBODY STILL IS WONDERING WHY the Treasury brokered the $100 billion superfund to clean up banks' off-balance sheet vehicles, the department's latest data on foreign investment in U.S. securities should dispel any confusion.
In August, at the height of the subprime-induced credit meltdown, some $163 billion of capital fled from U.S. securities, money markets and bank accounts, a record outflow and a stunning reversal from the July's $94 billion of inflows, according to Treasury International Capital data released Tuesday.
Foreign investors dumped $69 billion of long-term securities in August, including $39 billion in equities, an unusually big swing for the month, which was anything but usual. While small in size, the $4 billion liquidation of corporate debt securities was even more significant because it was the first in over 16 years.
Clearly, foreign investors are abandoning the U.S. credit market as conditions deteriorate. Whether contraptions such as M-LEV can replace them is an open question.