Thursday, August 25, 2011

Nothing Learned Whatsoever

Market crash within weeks

more gearing,more debt,lower interest rates and higher bank bonuses.Things are not going back to 'normal' anytime soon..we need to realise we have to take the pain and start from scratch imo.We still are in a houseprice bubble...its gonna get very very nasty imo

Posted by taffee @ 10:14 AM (3073 views)
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18 thoughts on “Nothing Learned Whatsoever

  • Last time it was the securitisation of junk mortgages and the collapse of Lehman. This time it’s centred on the political paralysis of the eurozone. The core is not politically able to do what’s required to clear up the mess – get rid of the euro, have dual Deutschmark and euro zones, subsidise the periphery through fiscal integration and eurobonds or some other means of providing relief for struggling countries – so banks will have to take a big hit on sovereign bonds and lose business because of the perceived risk of holding those bonds.

    The credit markets for bank funding are drying up as investors flee to cash or US Treasuries in response to sado-monetarist EU leaders’ kicking the can down the road when they ‘buy time by buying bonds’ and force self-defeating, debt-deflating austerity measures that, in addition to stifling growth in the periphery, reduce that periphery’s purchases of German goods, thus killing growth at the core too.

    Instead of blaming the PIIGS profligacy the EU leaders should look at the flawed arrangements which made the bailouts necessary – countries able neither to use monetary and fiscal policy to keep their economies afloat nor to receive fiscal transfers as necessary from the federal level, thus needing to borrow in a “foreign currency” for deficit-spending purposes, with its associated solvency and recessionary problems. (They should also consider that euroland runs a balanced current account with the rest of the world, so without the PIIGS’ ‘living beyond their means’ Germany wouldn’t produce the kinds of trade surpluses which enable its government to run relatively small budget deficits.)

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  • what you say is true…whats quite ironic is that the apparent ‘lunatic’ anti-gloabalisation mob were right!

    Globalisation have meant problems cannot be isolated and solved….now we have crazy situation of prople buying detached villas in bulgaria for #250,000 where the local salary is euros1000 per year…..possibly the deposit of which was from a remortgage in the UK from an american bank!

    all these dire loans are sitting on banks balance sheets all over the world….how is that solvable?

    had everyone had their own currency,they could have printed their way out of trouble or issued bonds in their own currency

    But nothing excuses the total disregard for money which is why the whole world seems to be in trouble..thats just in 15 years

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  • mark wadsworth says:

    I’m not convinced that what Greece needs to do is leave the Euro-zone, surely the best stop-gap solution is to simply allow them to write off a third or half their public debt, or for the Greeks to just do it unilaterally?

    I mean, if a UK person goes bankrupt, their debts get wholly or partially written off, but that doesn’t prevent that person from using sterling for his day to day transactions, does it?

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  • This time is different. It’s not as if a financial crisis has ever lead to a sovereign debt crisis before, is it?

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  • MW – but that wouldn’t do a lot to solve the main immediate problem of lack of investor faith in Europe’s banks.

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  • dude…exactly…that was always the stop gap

    this time there is nothing else we can turn to

    the world has simply funded an unsustainable lifestyle using cheap money that doesn’t exist,whereas money should in fact be an extension of human procutivity

    for instance my economics teacher said money exists so people don’t have to caryy around chickens to trade.

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  • mark wadsworth says:

    Icarus 5, you’re saying that as if it would be a bad thing.

    It would be a splendidly good thing, we can start again with new banks who know what they are doing (they could hardly be worse than the current lot, with possible exceptions for HSBC and Nationwide who seem to have done OK).

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  • if a crash is due why is warren buffet spending 5 billion on shares?

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  • MW @7 – in the meantime there could well be another financial crash as bad as the one of 3 years ago, this time centred on Europe. European banks are (a) stuffed with dodgy sovereign debt (b) weak on capital and liquidity (c) overly dependent on wholesale funding and (d) in a zone of recession and political paralysis such that investors are unwilling to provide that funding. The French and Germans have shown no signs of dealing with the problem and unless they can start to do so in a convincing way the financial system is liable to blow up again. Yes, bad banks should go, but……..

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  • Markets hate uncertainty. And not only is it uncertain who is how far up the creek, but it is uncertain whether a solution even exists for this situation. At least with what MW is saying there would be a bit of a clean slate.

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  • mark wadsworth says:

    TT, exactly, let Greece wipe off half its debts, let’s wind down existing banks and start again.

    We can still use the same cash machines, brach network, counter staff, computer systems, it’ll just be somebody else running them (like when e.g. B&B accounts were handed over to Santander).

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  • Clean sheet. Start again. You could have said that three years ago but the mess didn’t go away. Three years ago the immediate cause was banks behaving badly, this time the immediate cause is bad europolitics sinking big eurobanks. It’s more bad politicians than bad banks that need to be cleared out.

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  • They’re suffering from 30’s phobia, and who can blame them. It wasn’t the first crash that got ’em back then. It was the second, which (you guessed it) was three years later. So….

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  • mark wadsworth says:

    Icarus, Dill, this is not “the second crash” this is one long crash that has lasted (so far) about four years (I’d consider the official start to be the Northern Rock bank run).

    It’s all the same thing – banks lend recklessly to homebuyers, banks lend recklessly to governments, governments recklessly bail out banks, banks do the same thing again, this imperils governments, so EU or ECB bails out governments to bail out banks etc etc. So far they have take nine steps to make it worse for every one step they have taken to make it better.

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  • @14 mw

    Don’t forget all the carry trades which have precipitated from ‘the interference”. There’ll be mayhem if these are squeezed by a sudden u-turn intervention! It’s madness out there.

    What amuses me is the average Brit who’s clinging on to the notional ‘value’ of their bricks and mortar, and with it their conceit that they’re special for their complicity with a now discredited banking system. What will out, will out. but ‘out’ it will.

    My wish is that this nation finds some humility and humanity. Asking too much, perhaps.

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  • MW – “one long crash” – agreed – I’m saying that a clearout of bad banks doesn’t solve a lot In addition to the actions of banks and governments you mention the other problem of course is the long-term decline in aggregate demand stemming from (or associated with) wealth migrating upwards (itself associated with offshore, neoliberalism, influence over governments etc.). I’m saying also that the fuse that’s most likely to set off financial crash phase II is this euro thing – the PIIGS sovereign debt to GDP ratio is nothing like as high that of Japan, which still borrows at 1%, but the debts of the former are threatening to crash the euro banking system. Something’s wrong with the euro system.

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  • the euro system is much like sharing a wealthy family’s finances with a poor family’s finances it would and will never work

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  • does anyone know why gold articles are banned from this site???

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