Tuesday, February 19, 2008

Are we in a “bailout era”

U.K.'s Northern Rock Move

Worldwide we are seeing bailouts by SWF and governments. "Financial institutions have been pretty good at taking governments hostage," said Charles Wyplosz, an economics professor at the Graduate Institute in Geneva. "The taxpayer is likely to face a huge bill." EU regulation may force NR to be downsized for competitive reasons. "the bank's mortgage book to be reduced by around 50% to 60%, so that the ratio of the mortgage loans it has made against the deposits it has taken in is more in line with its U.K. peers." A lot of bad PR ahead for the gov owners - sacking NR workers, forced evictions for distressed mortgage holders, huge losses when hpc happens...

Posted by happyrenterz @ 08:19 AM (712 views)
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5 thoughts on “Are we in a “bailout era”

  • sold 2 rent 1 says:

    Are we in a “bailout era”?

    This “bailout era” is just the last ditch attempt to keep this debt bubble growing.

    The debt bubble started in the early 1950s.
    By 1972 the gold window was closed, as the first stresses in the monetary system appeared.
    Lower IRs and inflation caused the debt bubble to explode from 1980 – present.

    As the banks slow their lending it is time for SWFs and governments to take the debt creation helm.

    This bubble could run for another 2-3 years.
    The longer it takes to burst the more likely it will be the bubble to end all bubbles, with the final bubble being gold

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  • S2R agreed. Authorities are dead scared of gold because it restricts their ability to print money. That is why the price of gold is manipulated and these bubbles will be defended by bailouts to the bitter end. At some point we will vote in politicians who say enough is enough, lets go back to living within our means.

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  • “huge losses when hpc happens”

    There is no way the government, and hence the BoE, will allow an HPC while they are in hock, and dependent on the HPI, if they are to make this nationalisation of NR work, expect IR’s to plummet , sterling to sink and imported inflation to rise markedly (ofcourse the figures will be massaged), and the debt fuelled bubble to be re-inflated. The nationalisation of NR is the worst thing that can happen to HPC and will cause huge inflation discomfort, but HPI to continue – ‘dead cat bouncing’, anyone.

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  • Recent talk of ‘dead cat bounce’, ‘bubble continuing for a bit longer’, and so on……Don’t really see it myself. Major factor having an effect on a market is ‘belief’ ie what people believe will happen to the market. Well there is now starting to be so much negative media about the property market and the economy in general that this is starting to shape peoples belief that things aren’t that great. A consequence of this will be that potential buyers will wait and see, with the result that this will actually pull the market down. It is the same principle but in reverse as all the media in the past few years indicating that the market would continue an upward trend forever which resluted in shaping peoples minds to the effect that they jumped in and purchased even though they couldn’t really afford the price in the long run. Then add factors like the many Poles that are now returning home, the higher unemployment just around the corner, inflation, etc. With regard to inflation, discounts in stores will reduce inflation to some degree, but this tends to be on cloths, electronic goods, etc. But as things get tighter peoples purchasing will start to be focused more on things like food, etc. Food inflation will continue to rise pure and simply becasue there are now billions of people coming out of poverty in Asia and I suspect that there is currently insufficient farming supply to meet thsi demand 9and won’t be for some considerable time).

    Programme on channel 4 last night gave an excellent picture. It described that developers struggling to get finance and therefore big reductions in developments lie ahead (whicj will cause mass unemployment as the economy has relied on construction for a jobs boom). It also reported developers writing to there contractors demanding that they reduce there contract cost (even though the contract cost has already been agreed)-a real sign of desperation.

    The above doesn’t paint a picture of a bubble continuing for a couple more years.

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  • sold 2 rent 1 says:

    dbnazz1,

    Let’s distinguish the debt bubble from the housing bubble.

    The debt bubble is still growing in the US at a minimum of 10pc per year.
    The housing bubble is deflating in the US at 5-10pc per year.

    It is the bursting of the debt bubble that spells disaster for the economy with a depression.
    A housing bubble can easily deflate with only a recession.

    For the UK, this is the third major housing bubble within this debt bubble.
    History, intuition, debt levels as a pc of GDP, and Elliott wave theory all suggest that this housing bubble will burst along with the debt bubble.

    The UK housing bubble is starting to deflate from now. The debt bubble may last another year or 2.

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