Ben Bernanke, Mervyn King, Jean-Claude Trichet
Crisis may make 1929 look like a ‘walk in the park’
As central banks continue to splash their cash over the system, so far to little effect, Ambrose Evans-Pritchard argues things are rapidly spiralling out of their control. Twenty billion dollars here, $20bn there, and a lush half-trillion from the European Central Bank at give-away rates for Christmas. Buckets of liquidity are being splashed over the North Atlantic banking system, so far with meager or fleeting effects. “Liquidity doesn’t do anything in this situation,” says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression.
“It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue,” she adds. Lenders are hoarding the cash, shunning peers as if all were sub-prime lepers. Spreads on three-month Euribor and Libor – the interbank rates used to price contracts and Club Med mortgages – are stuck at 80 basis points even after the latest blitz. The monetary screw has tightened by default.
York professor Peter Spencer, chief economist for the ITEM Club, says the global authorities have just weeks to get this right, or trigger disaster. “They still have another couple of months before this starts imploding. Things are very unstable and can move incredibly fast. I don’t think the central banks are going to make a major policy error, but if they do, this could make 1929 look like a walk in the park,” he adds.
It’s the WAR! DUMB ASS!!!!
Plus stagnant wages, outsourcing and lowering interest rates, to an absurd lebel, in order to produce a housing/debt/refi bubble that temporarily created the impression of false strength in the economy.
MBAs have a short term memory that rivals the MTV generation.
Yep, but many other things to numerous to list. And like Global Warming, before the reality can no longer be denied, the tipping point is passed.
Or not. Depends on the modeling. But experts will explain it all, after it happens.
Oh don’t worry. We are safe, we have a president with a fancy degree in business management from a fancy school out east. He knows everything and he says we are fine. He might get his friends to return some of the money they have stolen, I mean been handed, over the past seven years and everything will be just fine.
The joke (on all of us) will be when each major party puts the blame on the other. And the media reports that as news.
Global warming?
Probably by the 2nd or 3rd quarter the US recession will be acknowledged…as continuing to spiral outwards.
Probably the only segment of the global market comparatively insulated from the disaster will be the ASEAN countries. But, the Euros won’t suffer as much as NA and SA. One of the delights of the Monroe Doctrine.
The predictors have been there all along: lawless government begets lawless finance, excess profit for few begets a greater risk for the rest of the population. And in the case of the sub-prime thieves, even the banking systems in nations that would never allow such patent-leather lending schemes couldn’t pass up the chance to make a quick buck off of gullible Americans with a corrupt administration.
And, yes, both of our Parties were absolutely aware of wtf was going on. Both profited. Both are culpable.
#7
Right On!!
As the neocons deliberately decided to bring the past to life again – bring back the age of the “golden era” to them or the “gilded age of the robber barons” to the rest of us, the same economic pattern that existed then comes to visit us now. Heavy Bull markets followed by heavy Bear markets. Has anyone ever looked at those old stock figure from the turn of the century (19th)? It’s up down up down up down with many, many big ups and downs or periods of recession and depression followed by “a booming economy.” People remember the great depression of ’29 on but that’s only the most recent. There were several before that, and as always, the middle and poor class suffered, not the Rockefellers, Astors and Morgans (read Bushes).
We are reliving history. Unfortunately, the people that own the media now are generally those that want to keep the public dumb and are some of the bad guys in this, largely through formerly illegal media conglomeration, despite the public saying not to allow this. Anyone see the recent FCC ruling allowing even more?
Well, it will be no surprise if I loose all my retirement due to these jerks but, ultimately, there’s very little any of us can do about it accept complain, loudly, vote our minds (though it won’t count where the Bushites rule) and, hopefully, literally throw these bums out if they show up in our neighborhood. Keep that in mind and keep your ropes, tar and feathers ready.
I can’t wait until the shit hits the fan and the downward spiral really kicks in. I’d love to see the rich get poor and the upper middle class assholes who blindly support our corrupt leaders and their illegal wars lose their SUV’s, homes, and plasma T.V. sets.
I hope it does “make 1929 look like a walk in the park.”
#7 is right on every point. I have been scouring financial sites and have learned ones to trust, and almost all the trustworthy ones are saying: Crap hits the fan the first quarter, all hell breaks loose by the end of 2008.
It is not just the subprime. Homeowners were allowed, even encouraged to put up second mortgages for up to 110% of the assessed value of their home. With values dropping, that 110% is now 150%!, and there are millions of people in the same boat.
“To put it in the simplest of terms, the total amount of bank capital in the entire country is a little over $1.1 trillion while more than $11 trillion in real estate loans exist meaning that a 10% to 15% loss on those loans would translate into the complete bankruptcy of the US banking system. What this all means is that we have a crisis of solvency, not liquidity.” – Link
Financial institutions around the world are all interconnected. If the US banking system goes down, the whole world goes down too.
Meanwhile, “Peak Oil” continues to be a looming threat. If we do suffer a world wide depression, a declining supply of fuel will prevent an economic growth solution, which is what got us out of the last depression.
Remember how Bush billed himself to the be the “first MBA president” ?
He was going too run the company like a CEO.
Run it into crapper, is what he did.
Even though the conservative moralize and finger wag at the liberals about our spending, it is the REPUBLICANS who sent America into the first Great Depression and they’re hell-bent on sending us into another one.
Man, we have to give these conservatives packing back to the bible belt and put grown up in charge of our government before it’s too late.
It may already be too late.
Think of countries as companies – the company must have a product that it sells to other companies at a profit.
It is that simple.
It becomes complex is when the books are ‘cooked’ so that the losses look like gains – only for a while until the losses cannot be hid anymore.
A Jam factory makes only so much jam and has only so much jam in stock. List that Jam factory on the market and it could be worth many times more than the Jam it can make and has in stock. Opps…
The US is the world’s largest consumer economy but how much of that is manufactured ‘in house’ – 20%? A look at the country of origin tags at any store will tell you.
Do the remaining ‘in house’ industries – account receivables- balance the imports – accounts payable, all expenses plus additional expenses like both wars?
Unfortunately the US is being run like a slick corporation…think Enron…when it needs to get back to basic Jam production.
Cheers
there is nothing surprising in what was written. So if companies and investors have known this for months, then why isn’t the stock market dropping?
In 1929, there was a sudden swing in Congress’ deciding to approve the Smoot Hawley tariff when it previously was thought to have no chance to pass.
What is the sudden change that would happen this time?
These banks going bankrupt, etc, should have investors hedging their bets and sending the market lower, but it’s not happening which suggests that the people who have really looked into don’t see a problem.
and the BOTTOM LINE??
the POOR will pay for it all.
HIGHER taxes
Lower wages
Paying for the RICH persons taxes with HIGHER prices.
corps shuffling the LOSS to another part of the company and raising the price to PAY it back.
ArianeB (#11),
Great article in the link you provided, thank you. Although quite scary how well the author lays it out…
#14
Maybe you are right that the stock market reflects the good condition of the national (and world) economy.
Of course, it might be as simple as gamblers doubling down to minimize their losses. They know if they slow the shuffle there will be a price to pay.
But could we stop just blaming the Republicans? They aren’t innocent, but all of those elected leaders in DC feeding at the trough should be thrown out.