Blackadder’s Lair

The home of many a cunning plan

Did I Miss It?

Last week Harvard economics professor posted an email from an unnamed economics professor on his blog chiding his fellow economists for being too nonchalant about the current financial situation and the proposed government bailout of banks, and included this ominous sounding warning:

A LOT of payrolls get paid at the end of the month. The next for many companies is September 30. Three different people with hugely relevant knowledge said to me today words to the effect of: “Why don’t your economist buddies want [insert fortune 100 company/companies here] to be able to pay their employees on Tuesday. If Washington doesn’t do something now, they won’t be able to”. That just scared the hell out of me. I can go into more details if you like, but all of them involve the four horsemen of the apocalypse.

After it was posted, these comments were cited by several bloggers and others as evidence that the proposed bailout plan had to be passed immediately.

It is hard to judge the credibility of what an unnamed economics professor says he was told by some unnamed third parties about the financial situation of some unnamed Fortune 100 companies. The warning might be legitimate, or it might be a bit of scaremongering. Fortunately, this particular warning contained an easily testable prediction: if Washington did not pass a bailout by September 30th, some Fortune 100 company would be unable to meet payroll.

Well, September 30th came and went, and no bailout was passed. I haven’t seen anything about any Fortune 100 companies being unable to meet payroll. Did it happen and I just missed it?

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October 1, 2008 - Posted by | Economics, Economy

1 Comment »

  1. Indeed fair point.

    I saw a news item on the WSF about RIFs coming at some major companies, but no specific company was named, although GE’s capital problems (due to owning a bank and using a huge amount of short term credit) were mentioned separately in the post.

    Since the thing went down in flames on Monday, I must admit to wishing as an analyst (even though the case for passing it seemed to me pretty strong) that they had let it lie as if really dead for a few whole days before announcing they were going to try again. Now we have thing visibly stablizing and various news outlets saying things like, “Markets stablize due to renewed hopes for a rescue plan,” but as we all know, these rationales for why the markets do what they do are always drawn straight from the head of the author.

    It’s not shocking to see a one day panic as the result of dashed hopes. But to have any idea what the markets would really do on their own we’d have to see at least 3-5 business days go by before bailout hopes were revived.

    Comment by Darwin | October 1, 2008 | Reply


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