Wednesday, Dec 19, 2007
Another raft of scary articles on the financial system
TheOilDrum.com: The Finance Round-Up: December 19th 2007
....To put it in the simplest of terms, the total amount of bank capital in the entire country (USA) is a little over $1.1 trillion while more than $11 trillion in real estate loans exist meaning that a 10% to 15% loss on those loans would translate into the complete bankruptcy of the US banking system. What this all means is that we have a crisis of solvency, not liquidity.
Ouch!
Posted by planning4acrash @ 09:31 PM (362 views) Add Comment
3 Comments
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1. Jonb said...
It's probably not quite as bad as that. Firstly, just because you have negative equity doesn't mean that everyone will default. A lot of people will, but not everyone. Secondly, not everyone has 100% mortgages. People who bought their house about 15 years ago before the bubble started, and haven't done any equity withdrawal since are not going to face negative equity unless things get really really bad - a lot more than a 15% drop in house prices.
The conclusion may well be right, but the figures they are using to reach that conclusion are not.
2. voiceofreason said...
Does this mean that what has really happened is that central banks effectively swapped gold backed currency for property backed currency ?
3. planning4acrash said...
Good point!