Thursday, Apr 24, 2008
Potential for Japan-style recession
Citywire: Barclays chief raises spectre of Japan if banks become too scared
John Varley, Barclays group chief executive, warns rival banks and investors in the sector that they risk creating a Japan-style recession if they become too risk averse.Varley warns: 'The example of the Japanese economy between 1990 and 2000 illustrates what I'm talking about. The Japanese banks' sense of risk aversion overtook the financial system, and that led to a decade of economic stagnation, as the banks stopped lending
Posted by jack c @ 12:14 PM (872 views) Add Comment
16 Comments
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1. paul said...
Ah, finally the CEO of a bank acknowledges what we identified here three years ago!!!
Credit boom leads to credit bust leads to deflationary spiral.
Well done John Varley.
BTW, can I have some of your money?
2. japanese uncle said...
Japan style 'lost decade' seems increasingly inevitable now, not because banks are scared, but because of their own irrational and unscrupulous behavior in the past decade in trebly rigging the housing market, let alone rubbish media that promoted charlatan chorus. It is the risk averse attitude demonstrated by the Japanese banks demonstrated during the past decade that has kept the full-scale repercussion of sub-prime turmoil at bay as far as the Japanese economy is concerned. `Lost decade` may not be so bad, as we will be coming back to the days when a pint would cost no more than a quid.
3. taffee said...
was just about to post 'japanese uncle should make a comment'
banks were scared because they realised what a monster they had created.....at least in japan you can buy a property if you want to start a family now.
Just how selfish have we become...funny to walk round bluewater and see thousands of people buying things they do not need.
4. jack c said...
Interestingly this topic has also featured in todays BBC working lunch programme which will be available to view via internet from 3.30pm today (Shaws shares is the relevant section with some nice graphs !)
None of this is of course news to HPC regulars but good to see it getting a wider commentary
5. Btl Rules said...
@ 1st post ......'what we identified here three years ago!!!'
really, thought you were going on about Icelandic banks being safest in Europe...your sense of the truth leave room for improvement
6. paul said...
@Btl Rules
Barclays is not an Icelandic Bank.
Duh.
7. jack c said...
@ Btl Rules - from the archives on this site you will find many references to the UK potentially being sucked into a Japanese style depression (long before the man from Barclays mentioned it)
8. waitingfor hpc said...
paul for the record i think your posts are always thought provoking and accurate. Btl rules is most likely an estate agent with a lot of time on his hands now ....
9. Btl Rules said...
@ 6 Paul, are you saying that you did not recently state that 'icelandic banks are safest to deposit money in all of Europe because they have £5B floating around' the day before it was headline news that they are on the verge of going bust?
@ 8 waitingfor hpc, ....whatever makes you tick is fine by me!
10. Btl Rules said...
re: @ comment 6 & 8 A quick reminder below of Paul's 'thought provoking and accurate' views!!
paul said...
Iceland's banks have over £5bn of UK savers cash sloshing about.
They're the least risky of all the European banks by that token alone.
Tuesday, March 25, 2008 01:34PM
http://www.housepricecrash.co.uk/newsblog/2008/03/blog-this-is-how-you-tame-inflation-and-keep-your-currency-strong-11502.php
11. greytornado said...
One of the problems of a Jap style do over here, is the situation of many older people, retired and with a nest egg, bringing in a reasonable return and thus boosting income. Interest rates on the floor - (Jap base rate half per cent or thereabouts?) will hit the grey voters hard. Given a choice as per earlier articles today that the BoE think they face; ie galloping inflation or a huge HPC - the crash must be the least worse option ? - Inflation gets everybody, but the HPC only gets those with equity issues and in any event time sorts out that problem eventually, but only if you can sit tight. Either way, Brown is toast, for he has taken the credit for a stable period and has said that he is resposible for the end to Boom & Bust. Any sign of a lynch mob yet ?
12. planning4acrash said...
Ju, was it really a lost decade? Recession all the way, or a monetary contraction that redistributed money from banks and government to the plebians?! They are afterall still 1 of the world's greatest economies and still manufacture. Your thoughts please!
13. japanese uncle said...
planning4acrash
Yes, it was a lost decade indeed in the sense that the wealth of the nation was constantly sucked by the foregin (mostly American) investment banks who did many scandalous insider tradings involving the senior ministers (apparently bribed by those institutions). 60% of the Japanese stock market is under the control of foreign players?! while more than trillion yen of the Japanese capital is attached to the sinking US treasury bonds that would never be allowed to be sold.
Detail shall be explained on another occasion.
14. planning4acrash said...
So, the banking elite are thieving our economy by purchasing defaulting concerns with money that they have printed for themselves, or had printed by government for them. How do we avoid this attack and corporate fascism? How could have Japan avoided it?
15. japanese uncle said...
No, many excellent Japanese companies are now under the control of them whose perspective should not go beyond the current quarter, asking for more and more dividend, using the money and wealth that ought to be used for longer term technological investment. They are the plague.
16. planning4acrash said...
Presumably therefore, the solution lies in the cancelation of unsustainable (fraudulent?) Debt, a move from fiat money and strong democracy and independent media. S2rent is truly radical for predicting this by november, i hope he's right!