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Sheer Heart Attack

Credit Crunch Reaches Downward Spiral Critical Mass

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http://www.marketoracle.co.uk/Article5690.html

Jul 31, 2008 - 07:51 AM

By: Mike_Shedlock

Moody's Corp.'s second-quarter profit fell less than analysts' estimated after the world's second- largest credit-rating company reduced the workforce and cut compensation to overcome a drop in demand for bond rankings...
..."The debt capital market, which is really our core business segment, is going through a very, very difficult time," said Mark Almeida, president of Moody's Analytics, on a management conference call today.
"We have a number of customers who are exiting segments of the business and we have had some very large customers go completely out of business."
Credit Crunch Reaches Critical Mass
Businesses do not want to lend, consumers do not want to spend, financing approved projects (even large projects in supposedly "recession-proof" Las Vegas) is difficult. Unemployment is soaring, demand for credit ratings is dropping, there is no driver for jobs, the service sector is shot and that is going to put still more pressure on consumer discretionary spending and business borrowing.
The credit crunch is not only pervasive, it has now reached critical mass where it will start feeding on itself. The Fed is powerless to stop it.

Years of excessive and careless lending. A bubble so big it inflated everything in its wake. A bust so big, it's going to take millions down with it.

House price crash? Now, it's a way-of-life crash.

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All bubbles burst. The only thing the BoE, Fed, ECB etc can do is to let it go. They must learn that you cannot beat the market. Its all based on the age old equation of supply, demand and price. The distortions must be worked through to regain eventual equilibrium. Bubbles can be prevented by fiscal prudence but they cannot be neutralised once they have been formed.

I believe Ben and perhaps the other 2, are aware of this which is why he is busy working on ways to avoid the next housing miracle. IMO, its simple: 3 times proven income--MAX.

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We are now realising how much the economy was driven by, and dependent on rising property values. So much lending was against growth in capital value.

So as as soon as property prices stopped rising, the writing was on the wall. The megacredit house of cards was doomed as soon as prices stopped going up - the prime example being BTL. Even stable property prices, neither rising nor falling, could not feed the hungry beast.

Edited by blankster

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All bubbles burst. The only thing the BoE, Fed, ECB etc can do is to let it go. They must learn that you cannot beat the market.

I'm guessing that these two simple lessons always get forgotten with each cycle.

After all, it's different this time (isn't it always :rolleyes: )

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I believe Ben and perhaps the other 2, are aware of this which is why he is busy working on ways to avoid the next housing miracle. IMO, its simple: 3 times proven income--MAX.

When we had low interest rates central banks should have put in place max lending rules so stop stupid people bidding up on property it's a bit difficult to over bid on a property if the bank was going to turn round f*** off where not lending you an extra £20k do we look f*****g retarded.

Instead the greedy bar stewards went with another £20k not a problem if fact we could make it £30k you could do a few house improvements or go on holiday, what do you say???

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Don't know if it's been mentioned already, but I heard that Deutsche Bank are chopping 40% of staff in the city. Are there any DB posters who can confirm this?

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  • 399 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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