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Si1

Ft Online Today - "head Of Germany’s Financial Regulator, Is Said To Have Warned Of The Worst Banking Crisis Since 1931."

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This is an intersting one, I have no idea how to comment:

The German government has pulled together a rescue operation – drawing in all three pillars of the country’s banking system – to shore up Europe’s first major casualty of the subprime crisis.

http://www.ft.com/cms/s/46fe1d80-4063-11dc...00779fd2ac.html

also mentions inevitable ir falls...

edit: whoops, just realised there's another thread dealing with similar, ignore at will :(

Edited by Si1

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:lol::lol:

Cuts on the way, maybe even tomorrow?

You are now all learning that the central banks would rather have bad inflation than ANY deflation.

possibly. cuts because the economy looks so dangerous.

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This is an intersting one, I have no idea how to comment:

Yes, there is another thread. Just wanted to mention: Sanio, the head of Bafin, is a lawyer, but I know people who know him and think he is quite bright. So, hearing this kind of warning from him should be taken seriously.

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:lol::lol:

Cuts on the way, maybe even tomorrow?

You are now all learning that the central banks would rather have bad inflation than ANY deflation.

They're talking about the Fed cutting once before the end of the year. Which won't happen. The Chinese have already cut back on their purchase of US debt. Lowering base rates will decimate the carry trade and then there will be NO liquidity at all.

What a lot of people have been saying for a long time is coming true. The US economy, and ours, is between a rock and a hard place. There is no way out. No rescue plan. No solution. Letting the inflation genie out of the bottle will not cause a recession in our economies - it will cause a slump.

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They're talking about the Fed cutting once before the end of the year. Which won't happen. The Chinese have already cut back on their purchase of US debt. Lowering base rates will decimate the carry trade and then there will be NO liquidity at all.

What a lot of people have been saying for a long time is coming true. The US economy, and ours, is between a rock and a hard place. There is no way out. No rescue plan. No solution. Letting the inflation genie out of the bottle will not cause a recession in our economies - it will cause a slump.

is it a possible choice between stagflation or a liquidity trap...?

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is a slump worse than a recession ?

Oh yes. I've never seen one in my lifetime although in 1974 when we had petrol ration cards issued and a 3 day week to save energy (oil crisis), it felt like everything was unravelling.

A slump is a recession times 10. Deflation sets in. No-one spends. No-one invests. No-one borrows. There is no liquidity. Unemployment soars. There hasn't been a slump since the 1930s which followed a period of irrational exuberance in the stock markets where people were borrowing to buy shares.

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is a slump worse than a recession ?

would that be one slump or two? :lol:

edit: sorry, gallows humour...

Edited by Si1

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Oh yes. I've never seen one in my lifetime although in 1974 when we had petrol ration cards issued and a 3 day week to save energy (oil crisis), it felt like everything was unravelling.

A slump is a recession times 10. Deflation sets in. No-one spends. No-one invests. No-one borrows. There is no liquidity. Unemployment soars. There hasn't been a slump since the 1930s which followed a period of irrational exuberance in the stock markets where people were borrowing to buy shares.

This what some here believe anyway: the Greater Depression is just around the corner. The only question is hyperinflation or stagflation. Some even think deflation, I doubt it. As LargelyIgnorant always puts it: things Westerners buy with debt (houses, stocks) will slump, things they buy in cash (oil, food, gold) will soar.

Edited by Goldfinger

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Don't worry about the Germans. Their financial regulation is overbearingly prudent, I guess this is as a result of the horrors inflicted by hyperinflation early in the 20th century. We are not necessarily reckless - they are exceedingly cautious. So they will be reacting to this way before there is any real problem.

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This is an intersting one, I have no idea how to comment:

The German government has pulled together a rescue operation – drawing in all three pillars of the country’s banking system – to shore up Europe’s first major casualty of the subprime crisis.

http://www.ft.com/cms/s/46fe1d80-4063-11dc...00779fd2ac.html

also mentions inevitable ir falls...

edit: whoops, just realised there's another thread dealing with similar, ignore at will :(

They would have let it go to the dogs unless there was something ghastly lurking there. IMO this outfit have laid off their risk around the place and if they have to confess to having bad debts then they and a number of others are buggered. If i am right, a state intervention is a good thing as it will protect jobs for the short term at least (as well as VI blah blah blah).

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Don't worry about the Germans. Their financial regulation is overbearingly prudent, I guess this is as a result of the horrors inflicted by hyperinflation early in the 20th century. We are not necessarily reckless - they are exceedingly cautious. So they will be reacting to this way before there is any real problem.

STF, stop trying to sound like an expert on everything...Having the government bail out a major lender isn't a real problem?

Their banking isn't exceedingly cautious, it's just based on common sense more than ours seems to be. While we've partied it up, they've gone through the pain and now look at them - pretty much a model of how to succeed in the modern world. While our lifestyle hits a brick wall, they will at least be able to make things that people want. They got it right, we've screwed it up so it seems.

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Some even think deflation, I doubt it. As LargelyIgnorant always puts it: things Westerners buy with debt (houses, stocks) will slump, things they buy in cash (oil, food, gold) will soar.

I think that's spot on. People keep using Japan as an example of why we might end up with deflation but they have a very different set of social arrangements with everyone saving a lot more money directly. When things got tough, they just did what they've always done and saved more money in case it was needed later. It'll be different here, probably not dissimilar to the early 90s recession only a lot more so. Current conditions seem quite similar to the Lawson boom to me.

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This what some here believe anyway: the Greater Depression is just around the corner. The only question is hyperinflation or stagflation. Some even think deflation, I doubt it. As LargelyIgnorant always puts it: things Westerners buy with debt (houses, stocks) will slump, things they buy in cash (oil, food, gold) will soar.

This is the only economic question that I think I do not know the answer to. There is going to be a recession in my view -but the only thing that is uncertain is whether it is going to accompanied by stagflation (e.g 1970s) or deflation (e.g 1930s).

The problem is that at an individual level, deflation means I should sell every asset now and stick all the cash in the safest possible place. In an inflationary world I should borrow as much money as humanly possible now and buy property and equities. The only thing that I know I should not do in either circumstance is just put my money in a bank.

I am currently betting on deflation but very worried about inflation. My cash is not in a bank.

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This is the only economic question that I think I do not know the answer to. There is going to be a recession in my view -but the only thing that is uncertain is whether it is going to accompanied by stagflation (e.g 1970s) or deflation (e.g 1930s).

The problem is that at an individual level, deflation means I should sell every asset now and stick all the cash in the safest possible place. In an inflationary world I should borrow as much money as humanly possible now and buy property and equities. The only thing that I know I should not do in either circumstance is just put my money in a bank.

I am currently betting on deflation but very worried about inflation. My cash is not in a bank.

It's the debt here have made china, and the debt is inflationary in the sense that it brings up inflation by growth in china enough through increasing commodity values to delfate the bubble. The credit is self destructive ,and backfire on itself. I don't think it cause hyperinflation, if that was the case, the gold price would have been higher, rather credit cause deflation, and it's how they choose to fight it that determine what we get. To fight real deflation, politicians must go to war, build railroads, print real cash, or buy actual things with freshly printed money, none of these are normal. Any of these things will send the gold price soaring. Many people think that the best is to let a deflation run it's course, and I agree. But because of politicians, connections, and so forth, it's not impossible we rather see hyperinflation.

Edited by carseller

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We will have an all out collapse, people will be queuing to jump out canary wharf before this is over, either that or their heads will roll.

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