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A.steve

Thinking The Unthinkable: What If It's Not That Bad?

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Last week it was the worst financial crisis since WWII. Methinks someone's not looking at the bigger picture here, or maybe the author got laid last night.

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You know that to some extent I'd agree... maybe I am young and stupid, but I can't imagine the governments and CBs committing to such disastrous measures as in 1930s. As for the UK, the NR case is the first major test - will it be liquidated by contracting its business behind the official curtain or will they (Brown & Darling) truly try what Japan's been doing since early 1990s? Namely, to keep alive zombies and prevent market economy re-allocate economic resources.

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Well, just last week we had Bear Stearns takeover for $2 per share and the Halifax 'run'.

The markets have been in the depths of despondency, just got through last week, had a nice Easter holiday break and people decided en masse that perhaps it wasn't really that bad after all.

Last Week: "It's going to be the worst recession since 1929"

This week: "It's not going to be 1929"

Excuse me but what's changed ?

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Last Week: "It's going to be the worst recession since 1929"

This week: "It's not going to be 1929"

Excuse me but what's changed ?

My thoughts precisely. That's a long, long way from saying everything's fine.

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My point is that it is amazing that people think it is necessary to claim that it isn't the same as 1929. We must have already accepted that it is worse than the post-tech-blip in 2001; worse than the ERM debacle in 1992; worse than the oil crisis in the 1970s; worse than World War 2.

And what exactly did the article say again? No, not that this time it is less severe - just that it will be different.

As reassuring articles go, it doesn't do a great job.

Edited by A.steve

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will it be liquidated by contracting its business behind the official curtain or will they (Brown & Darling) truly try what Japan's been doing since early 1990s?

I think this is what is already happening. If my numbers are correct the authorities are subsidising bad bank investments to the tune of 1 trillion dollar already:

- ECB: $500bn (the first to swap crap for money BTW)

- US Fed: $400bn

- UK: $200bn

I haven;t the fainstest to what extent Japanese authorities subsidised its own banking system in the 90s, but this could well be an even bigger bailout already.

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are we not agreed that the whole mess will be sorted by simply socialising the debt? Govts/CBs buy up (sorry take as security) all the toxins...er that's it. No more loony lending for a couple of decades, banks revert to cost centres; squeezing the pips of every worthwhile consumer, and the financial world keeps turning. Those clinging on to some doomsday scenario were we have a T3/mad max/Blade runner style existence are simply anarchists, of which more and more appear to be frequenting this forum on a regular basis :unsure:

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Last Week: "It's going to be the worst recession since 1929"

This week: "It's not going to be 1929"

Excuse me but what's changed ?

The journos have been told to start talking it up by their backers

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I think this is what is already happening. If my numbers are correct the authorities are subsidising bad bank investments to the tune of 1 trillion dollar already:

- ECB: $500bn (the first to swap crap for money BTW)

- US Fed: $400bn

- UK: $200bn

I haven;t the fainstest to what extent Japanese authorities subsidised its own banking system in the 90s, but this could well be an even bigger bailout already.

yeah but these are against highly valuable collateral known as CDOs and MBSs dontchaknow

And its all short term loans, so the banks will pay it all back in a couple of months.

NOT

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Well, just last week we had Bear Stearns takeover for $2 per share and the Halifax 'run'.

The markets have been in the depths of despondency, just got through last week, had a nice Easter holiday break and people decided en masse that perhaps it wasn't really that bad after all.

Well, firstly, the market is one hell of an efficiency beast as it never looks into the rear mirrors as many of us often do. We often forget that the market prices in all views including those that know much more than any of us here does.

Secondly, the reason it's probably in nirvana is that JPM offered $10 for Bear Stearns indicating that the true value of the bank is much higher than intitially proposed, i.e. Bear Stearns wouldn't have been forced down to its knees if it hadn't been subject to liquidity trouble - even a healthy bank can go down if there is a run on it (distrust).

Not saying the current valuations are OK, just that we shall not forget that 'market can stay irrational longer than we can stay solvent' (if it's irrational in the first place that is, but we never know it until after...).

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Last Week: "It's going to be the worst recession since 1929"

This week: "It's not going to be 1929"

Excuse me but what's changed ?

The sun came out today.

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I think this is what is already happening. If my numbers are correct the authorities are subsidising bad bank investments to the tune of 1 trillion dollar already:

- ECB: $500bn (the first to swap crap for money BTW)

- US Fed: $400bn

- UK: $200bn

I haven;t the fainstest to what extent Japanese authorities subsidised its own banking system in the 90s, but this could well be an even bigger bailout already.

I see your point. And I don't know if and how is it possible to draw a fine line between ensuring survival of the financial system and bailing out reckless shareholders. Surely we would ideally love to see them raise the capital on their own so that new shareholders eat into their profits as a punishment for moral hazard issues. But then, look at Blair or Schroeder etc... it seems that one of very potent solutions would be to make ex-government leaders retire on good packages banning them from private business. It would save loads of public resources in general by reducing corruption they commit to during their legacy.

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I recall reading in Fred Harrrison's, BOOM BUST, House Prices, Banking and the Depression of 2010 that the Japanese Central Banks injected 30 Trillion Yen in 2003 alone. A lot of funny money is being introduced into the system and I think it is fair to assume that we have almost reached a state of zero regulation. Without regulation the financial system will simply collapse much in the same way a Premier League football match would never last 90 minutes without a referee.

I don't think anarchist's are the problem, unless you consider the likes of Gordon Brown, Merv King, and Ben Bernanke, to be one. They are however systematically wrecking the financial systems of the world in the vain hope that a miracle will happen. It won't as the size of the world wide debt is many times greater than the world economy in it's entirety. In essence, the planet is bankrupt and the ONLY solution is hyper inflation and debasement of world currencies.

However, it is unlikely that any Government would allow the working populace to get a decent payrise to keep up with this inflation and so we can expect civil unrest fairly quickly as people are no longer able to feed themselves or their families.

I you wish to understand the thin veneer of civility that exists today then you only need to read about the rise of Nazi Germany and how supposedly "normal people" very quickly started behaving badly.

I think we are seeing the beginning of the end of of existing financial system.

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All you have to do is read this...

http://www.telegraph.co.uk/money/main.jhtm....xml&page=1

and that gives a good idea how incredibly dangerous things are....

Yes, this information is not very exciting, but I hope US won't have such a big recession. I read that Ben Bernanke, chairman of the US Federal Reserve, will cut interest rates this week in a renewed effort to stave off recession, after the bail-out of investment bank Bear Stearns sent shockwaves through the world's financial markets.

However, with a clutch of investment banks reporting this week, Wall Street is anxiously awaiting more bad news; several highly leveraged hedge funds are said to be close to collapse. The Fed announced $200bn of emergency funding last week but it has failed to restore calm.

It's closely connected with mortgage meltdown in US. A big reason why is that, to avoid discrimination charges, lenders gutted their traditional lending standards in order to loan money to people with bad credit as you can find in internet everywhere for example www.badcredit-mortgages.org.uk (bad credit is more common in some minority communities, so refusing to lend money to people with bad credit is alleged to have a racially “disparate impact”). The Community Reinvestment Act, which punishes banks that don’t make loans in high-risk areas, is also a key reason why (it was enacted and then made even more onerous by the very politicians who are now shrieking about the mortgage crisis they helped create).

American sub-prime mortgage market and has got progressively worse since. One senior banker in London said: “This is the beginning of the real credit crisis and it’s not going to end without a major casualty.”

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maybe I am young and stupid, but I can't imagine the governments and CBs committing to such disastrous measures as in 1930s.

Maybe you are young and stupid, maybe you're just naive. You seem to think governments are run by exceptionally talented and wise people who know better than others how to do things. They aren't. They're run by people who decided being an MP would be good for a laugh, and who then worked the system and their way up the ladder and, one day, found themselves as PM. Look at who we have now. Do you think Gordon Brown is, in any way, exceptionally able at anything?

Yvette Cooper, Jacqui Smith and Hazel Blears are cabinet ministers for F*CKS sake. A bigger bunch of eegits it would be hard to imagine.

But, governments aside, the reason why we're in this mess is because we seem to have collectively decided to throw our manufacturing industry in the dustbin. We seem to be a nation of PR companies, gardeners and graphic designers. There is a franchise you can buy now where your job is to go around maintaining people's lawns. I mean, for heaven's sake. Is this any way to make a living? I've never seen a service based economy as sustainable. And, worse, in times of trouble we will be in the sh1te - relying on others for essentials.

The only way we have been able to sustain our economy, given that little real wealth has been created in the last 20 years, is through borrowing against assets. We all know this can't go on forever. But does Gordon Brown? I have no faith at all that he has the wit to avoid a 1930s style depression. Because he never seems to have admitted that our economic growth is based on debt and unsustainable.

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Those clinging on to some doomsday scenario were we have a T3/mad max/Blade runner style existence are simply anarchists, of which more and more appear to be frequenting this forum on a regular basis :unsure:

Haha, indeed there are amany here. I also think the little box to the left should add a third choice: Bulll/Bear/ConspiracyTheorist

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are we not agreed that the whole mess will be sorted by simply socialising the debt? Govts/CBs buy up (sorry take as security) all the toxins...er that's it.

The question then is, whether the CBs can actually do this. I am unclear as to what the constraints on CBs on assuming all the bad debt are. Presumably it negatively affects the currency, which is a problem in countries with structural trade imbalances (US and UK, for instance). Japan seems to have managed it, but it's a net exporter, and still, Japan doesn't seem to have been very healthy for the past decade.

Some are arguing that the volume of bad debt is so great that it does lie beyond the powers of the CBs to take it all over (Methodius, for example). If that's true, do we go 1929?

Can anyone who knows explain what the constraints on CB action are, and whether that snookers the socialize debt route?

Peter.

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My point is that it is amazing that people think it is necessary to claim that it isn't the same as 1929. We must have already accepted that it is worse than the post-tech-blip in 2001; worse than the ERM debacle in 1992; worse than the oil crisis in the 1970s; worse than World War 2.

And what exactly did the article say again? No, not that this time it is less severe - just that it will be different.

As reassuring articles go, it doesn't do a great job.

Very true. :ph34r:

FWIW I would much prefer to live through a '92 than a '29, so i hope this guy has it right!

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Haha, indeed there are amany here. I also think the little box to the left should add a third choice: Bulll/Bear/ConspiracyTheorist

Can't argue - that's why I'm a "neither"...and a bit of an anarchist to boot!!!

There is a conspiracy by the way, but the clever bit is that - unlike three blokes down the pub planning a bank job - it is no secret.

The whole thing is skillfuly hidden away in plain view and broad daylight - it is so obvious and in yer face that rational people just can't accept it.

And those that can see it are automatically "nutters".

Guess that makes me Henry the Eighth or Napoleon...oh shit, gotta go, here's Matron with my pills...

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I recall reading in Fred Harrrison's, BOOM BUST, House Prices, Banking and the Depression of 2010 that the Japanese Central Banks injected 30 Trillion Yen in 2003 alone. A lot of funny money is being introduced into the system and I think it is fair to assume that we have almost reached a state of zero regulation. Without regulation the financial system will simply collapse much in the same way a Premier League football match would never last 90 minutes without a referee.

I don't think anarchist's are the problem, unless you consider the likes of Gordon Brown, Merv King, and Ben Bernanke, to be one. They are however systematically wrecking the financial systems of the world in the vain hope that a miracle will happen. It won't as the size of the world wide debt is many times greater than the world economy in it's entirety. In essence, the planet is bankrupt and the ONLY solution is hyper inflation and debasement of world currencies.

However, it is unlikely that any Government would allow the working populace to get a decent payrise to keep up with this inflation and so we can expect civil unrest fairly quickly as people are no longer able to feed themselves or their families.

I you wish to understand the thin veneer of civility that exists today then you only need to read about the rise of Nazi Germany and how supposedly "normal people" very quickly started behaving badly.

I think we are seeing the beginning of the end of of existing financial system.

Who are we in debt to - the Martians? :)

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There is a conspiracy by the way, but the clever bit is that - unlike three blokes down the pub planning a bank job - it is no secret.

The whole thing is skillfuly hidden away in plain view and broad daylight - it is so obvious and in yer face that rational people just can't accept it.

You mean the quants (et al) and the Boca Raton set with their devious schemes devised to conceal risk? The man-down-the-pub might not have seen it coming but many did, including myself.

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  • 294 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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