Sunday, January 13, 2008

Hoo boy!

It's Not 1929, but It's the Biggest Mess Since

It was Charles Mackay, the 19th-century Scottish journalist, who observed that men go mad in herds but only come to their senses one by one. We are only at the beginning of the financial world coming to its senses after the bursting of the biggest credit bubble the world has seen. Everyone seems to acknowledge now that there will be lots of mortgage foreclosures and that house prices will fall nationally for the first time since the Great Depression. Some lenders and hedge funds have failed, while some banks have taken painful write-offs and fired executives. There's even a growing recognition that a recession is over the horizon. But let me assure you, you ain't seen nothing, yet.

Posted by lvmreader @ 10:59 PM (3188 views)
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6 thoughts on “Hoo boy!

  • “Everyone seems to acknowledge now that there will be lots of mortgage foreclosures and that house prices will fall nationally for the first time since the Great Depression.”

    When is our country going to acknowledge our problems? I see no real concern at layman level about the state of our economy.

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  • This article is from Dec 5th…it’s a good article but this site works best if stuff is up-to-date so the reader doesn’t keep churning over things they may have read a few weeks ago.

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  • Our economy is a lagging one to the US – at least for financial markets. Not enough UK companies have declared problems yet and not enough execs have lost their jobs. House prices are only starting to soften, and the extent to which lowering interest rates helps recover the economy will be the clear signal. If, as we suspect, the future IR cuts do nothing (as is the case in the US) then people will realise in the UK. When the MPC start to drop rates drastically, they will in effect start the confessing process. In the financial markets you will lose business unless you can compete with the US. If the US used questionable techniques, then either the UK stood and watched losing business, or they reciprocated. Knowing that NR were overexposed, subprime mortgage suppliers have gone phut, city bonuses are already taking a tumble and commercial property is seriously wounded, what do you think is going to happen?

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  • @growler

    That seems like a very insightful comment. I really hope you’re wrong about the BoE cutting rates but understand that political pressure to do so will be strong.

    “What do you think is going to happen next?”

    Not much really, until the press cannot avoid admitting that house prices are on their way down which will be between summer and end of year I’d guess.

    Meanwhile, all my friends carry on business as usual.

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  • I haven’t seen that article posted here before,so thank you. Unemployment is the key to how fast this will escalate. The government can’t prop-up the public sector, as they have in the past. They simply don’t have the money. If people start losing jobs on a large enough scale this could turn very ugly indeed. There are so many unknowns, previous stats and data mean little as the current circumstances are without precedent.

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  • ”I really hope you’re wrong about the BoE cutting rates”

    It’s political….so the idiots will probably do it.

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