Wednesday, October 7, 2009

Financial sector still in the maelstrom

U.K. Faced ‘Bank Runs, Riots’ as RBS and HBOS Neared Collapse

British banks have only recognized 40 percent of a likely $604 billion in writedowns from 2007 to 2010, and earnings won’t be sufficient to offset this, the IMF said Sept. 30. A sluggish economy and rising unemployment will add to loan losses, it said. “Trust has returned, but there is too much trust and people are taking risks blindly,” said LSE’s Kirchmaier. “If you look at the market, people assume it is back to normal, but there are huge risks in the system.”

Posted by novice pete @ 10:09 PM (909 views)
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4 thoughts on “Financial sector still in the maelstrom

  • So the banking crisis has really been a delayed loss expectancy exercise courtesy of the taxpayer.

    There were no riots because the banks were saved and everyone could go back to the important business of seeing house price rise again.

    The banks were saved not by writing blank cheques, but by writing magic cheques; where the zeroes or indeed any numbers could simply be added on later “when the full cost of the loan writedowns would become known”.

    As debt demand ebbs away to nothing as the inevitable deflationary spiral dictates and banks loan losses mount up, who says there won’t be riots?

    If Iceland can get their government to resign en masse, the UK can too.

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  • The magic cheques are drawn on the labour of the future – taxes to be paid by our children and grandchildren. That is all that has happened. The losses still exist, merely that we have mortgaged our collective futures to pay them. Foreigners are prepared to lend cash to the UK govt that they would not have lent to the individual banks. So instead of a massive crash and subsequent fairly rapid recovery we will string out the losses over decades. As Japan has done. I make no judgement of which is preferable, merely what has occurred.

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  • More writedowns in the pipeline.

    Even if NuLab resigned, can Cameron (or indeed anyone else) fix our problems? The economy isn’t going anywhere. Anyone with a good software/computing idea manages it offshore, these days. The climate and taxation regime is better for a start…

    We have lots of loan defaults coming: private and corporate, methinks. Shops are still closing up and “For Sale” signs grow on our industrial estates – they don’t make the BBC news. The legislation on reposessions will keep folk in a home a bit longer, delaying the inevitable, alas!

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  • @2

    Perhaps JU can answer this: If I was japanese and in Japan at the start of this long drawn out deflationary period – what would have been my best course of action: put all my yen into other currencies? sell and rent? leave the country?

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