Why the crash might be bigger than people expect

[bartelbe]

Just started watching MADOFF:The Monster of Wall Street on Netflixs, the documentary about Bernie Madoff's financial fraud. They have got to the 2008 financial crisis and the collapse of housing market in the US. With there being a similar collapse here. They were talking about record house price falls and foreclosures, it looked like the housing boom and bubble was over.

Of course we know that never happened because the world's central banks collapsed interest rates and started printing free money for their banker mates. Inflating house prices to record levels and creating a new bubble.

It just occurred to me that the crash that should have happened in 2009 never happened thanks to massive intervention in the market. That crash was effectively delayed to now. So we might not only see the gains of the last decade wiped out but the long delayed crash from the 2008 crisis come to fruition. 

Except this time, the central banks and the government have nothing left to bail the market out with.

[NoHPCinTheUK]

There is something left. Our money and financial assets. I sort of recall they did something similar in Spain or Italy back in the 90s. The gov just took 2% of all account balances overnight. 

[Brendan110_0]

Plebs taking a haircut with inflation 10% for a decade.

[Casual-observer]

7 minutes ago, bartelbe said:

Just started watching MADOFF:The Monster of Wall Street on Netflixs, the documentary about Bernie Madoff's financial fraud. They have got to the 2008 financial crisis and the collapse of housing market in the US. With there being a similar collapse here. They were talking about record house price falls and foreclosures, it looked like the housing boom and bubble was over.

Of course we know that never happened because the world's central banks collapsed interest rates and started printing free money for their banker mates. Inflating house prices to record levels and creating a new bubble.

It just occurred to me that the crash that should have happened in 2009 never happened thanks to massive intervention in the market. That crash was effectively delayed to now. So we might not only see the gains of the last decade wiped out but the long delayed crash from the 2008 crisis come to fruition. 

Except this time, the central banks and the government have nothing left to bail the market out with.

They arguably delayed it in order to allow the banks to handle the losses.

You could be right to a point but with inflation I’m not sure you’ll see that level of correction occurring.

[Brave New World]

Madoff, a "monster" because he did over his own

What a tinpot title

[ftb_fml]

Exactly.. instead of allowing the economy to collapse and reset as it should have, rates were slashed and money printed to bail out the banks, keep the public happy and this serve the political interests of those in power.

This may have worked in the short term and they might have gotten away with it had they tightened the money supply and gradually raised rates once everything had stabilised. However they chose not to as it made them popular with voters through the wealth effect, and no doubt housebuilder party donors / others who saw an opportunity to profit.

Now they've painted themselves into a corner since surprise, surprise decades of ruthless currency debasement and cheap debt has proven enormously inflationary. They have nowhere to go as leaving rates low to keep the debt junkies on life support will do nothing to arrest inflaction and further trash our already weak currency, while raising rates to curb inflation will screw all those with massive amounts of debt.

Basically there's no way out that I can see - either the housing market takes a hit, or the whole economy goes down the pan.

[Extreme_biker0]

1 hour ago, NoHPCinTheUK said:

There is something left. Our money and financial assets. I sort of recall they did something similar in Spain or Italy back in the 90s. The gov just took 2% of all account balances overnight. 

Is there anywhere we can read about the details of this? Maybe I'm not searching for the right terms but can't find anything at all?

[bartelbe]

29 minutes ago, ftb_fml said:

Exactly.. instead of allowing the economy to collapse and reset as it should have, rates were slashed and money printed to bail out the banks, keep the public happy and this serve the political interests of those in power.

This may have worked in the short term and they might have gotten away with it had they tightened the money supply and gradually raised rates once everything had stabilised. However they chose not to as it made them popular with voters through the wealth effect, and no doubt housebuilder party donors / others who saw an opportunity to profit.

Now they've painted themselves into a corner since surprise, surprise decades of ruthless currency debasement and cheap debt has proven enormously inflationary. They have nowhere to go as leaving rates low to keep the debt junkies on life support will do nothing to arrest inflaction and further trash our already weak currency, while raising rates to curb inflation will screw all those with massive amounts of debt.

Basically there's no way out that I can see - either the housing market takes a hit, or the whole economy goes down the pan.

It was worse than that, they blew a massive opportunity. They could print free money with zero inflation and had the banks/markets over a barrel. Wall Street and the City needed government bailouts to survive.

They could have taken over all the banks and directed them to spend all that free money on infrastructure and the real economy. Imagine what Britain would be like now if the money that has been pissed away in the housing bubble had been used to build new nuclear power stations, windfarms and railways. If it had been used to rebuild our schools and hospitals. Been used to build world class exporting companies.

Instead we wasted it inflating house prices and making bankers rich.

[bartelbe]

1 hour ago, Brave New World said:

Madoff, a "monster" because he did over his own

What a tinpot title

Quite, the entire financial system was bent in 2008. Take the credit rating agencies, they gave triple AAA ratings to stuff they knew to be garbage and no-one went to jail. Madoff's mistake was to be a blatant fraud in an industry of fraudsters. 

[petetong]

13 minutes ago, bartelbe said:

It was worse than that, they blew a massive opportunity. They could print free money with zero inflation and had the banks/markets over a barrel. Wall Street and the City needed government bailouts to survive.

They could have taken over all the banks and directed them to spend all that free money on infrastructure and the real economy. Imagine what Britain would be like now if the money that has been pissed away in the housing bubble had been used to build new nuclear power stations, windfarms and railways. If it had been used to rebuild our schools and hospitals. Been used to build world class exporting companies.

Instead we wasted it inflating house prices and making bankers rich.

Yeah but then the rentier classes and spivs wouldn't have had a party for 14 years at our expense. That's the difference between countries like Norway, Switzerland and the UK. They are run, to some extent, to benefit their citizens, whereas the UK is run to benefit the privileged few.