Global financial system implosion begins

[Dr Jon]

... given the size and nature of the maneuver, creating a new variant on the good/bad bank model that I hereby christen "fucked" bank. You do that, of course, when removing all the toxic assets from a "good" bank's balance sheet would leave no bank behind at all.

From:

Good Bank, Bad Bank, and Fucked Bank

 

[pinkychukkles]

Interesting article for those who may be interested, by Michael Lewis who wrote Liar's Poker, about the end of the Wall Street boom:
http://www.portfolio.com/news-marke...folio/2008/11/11/The-End-of-Wall-Streets-Boom

 

[Dr Jon]

Interesting article for those who may be interested, by Michael Lewis who wrote Liar's Poker, about the end of the Wall Street boom:
http://www.portfolio.com/news-marke...folio/2008/11/11/The-End-of-Wall-Streets-Boom

The vast assemblages of highly paid people inside the firms were essentially worth nothing. For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.
~
... If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.

Reassuring to see that my loathing of money-juggling yuppie parasites is rightly justified.

 

[Kaka Tim]

I just heard alistair darling anounce that '(according to the world bank) the global economy will double in size over the next two decades'.

I'm guessing that is is based on nothing more than economic growth over the past two decades and is not taking any account of global warming, fresh water shortages or peak oil.

I'm willing to make a virtual bet of £100 that the global economy will do no such thing and that it will struggle to get significently larger than it was at its previous peak (a year ago?)

 

[Dr Jon]

I just heard alistair darling anounce that '(according to the world bank) the global economy will double in size over the next two decades'

WTF is he / they on?
Not planet Earth, it would seem...


Watch thou for the blah-blah men

 

[Barking_Mad]

BBC 2 - Tonight (24th November)

This World: American Time Bomb
Financial expert David Walker explains why he believes US national debt - said to stand at $10trillion - poses a greater threat to the world economy than the banking crisis. Having resigned from his position as Comptroller General of the United States to highlight the problem, he argues that it is a structural weakness of the American economy - and likely to get worse

For those unable to get BBC, there is some stuff on Youtube (60 Minutes Interview) with the guy mentioned above, here:

 

[Bob_the_lost]

I just heard alistair darling anounce that '(according to the world bank) the global economy will double in size over the next two decades'.

I'm guessing that is is based on nothing more than economic growth over the past two decades and is not taking any account of global warming, fresh water shortages or peak oil.

I'm willing to make a virtual bet of £100 that the global economy will do no such thing and that it will struggle to get significently larger than it was at its previous peak (a year ago?)

Is that taking deflation and the possible abolition of the pound into account?

 

[elbows]

Suffering will more than double in the coming decades, not sure about anything else.

Saw this in a Guardian article about todays pre-budget report, some tiny bit of good news at least:

Stephen Lewis, economist at City broker Monument Securities, said the role of highly-paid City whizz-kids in creating the crisis may have helped the decision. "One way in which the world may have changed … is that the political consensus in favour of 'trickle-down' theories of wealth generation has collapsed. Mr Obama's policies also call for a substantial increase in the tax burden borne by 'the rich'."

( http://www.guardian.co.uk/business/2008/nov/24/pre-budget-report-alistairdarling2 )

Bye bye evil trickle-down theory, shall not miss ye.

 

[david dissadent]

BBC 2 - Tonight (24th November)



For those unable to get BBC, there is some stuff on Youtube (60 Minutes Interview) with the guy mentioned above, here:

Did a thread on this guy a while back

link

Id also add I except this to utterly cain the dollar in the coming years and to make US treasuries toxic with easily double digit interest rates.

 

[pinkychukkles]

Good programme; the whole mortgage, CDO, subprime etc thing wasn't the focus - just the fiscal irresponsibility of the US Gov't; and, after what Darling has announced today, the programme could apply just as much to UK Plc as well. I thought it concisely explained the situation to anyone who finds that economics is a real turn off and should be essential viewing, like for most of the people they interviewed on the street who had a very basic grasp of the issues. The real crux is something that could expose the weakness of our democratic institutions - when politicians have to take very very unpopular but essential measures, if the public don't understand how necessary they are then the populist demagogue politicians get elected instead and then the danger really does start to get critical.

 

[elbows]

The real crux is something that could expose the weakness of our democratic institutions - when politicians have to take very very unpopular but essential measures, if the public don't understand how necessary they are then the populist demagogue politicians get elected instead and then the danger really does start to get critical.

Yeah thats my ultimate concern, well that and war, famine, energy crisis, eco doom.

Dubai has been having a wobble lately:

http://news.bbc.co.uk/1/hi/business/7745711.stm

I think I might just give up trying to work out which countries could do OK in future. Does anybody have any money or is it just illusion the world over? A stark reevaluation of what real weath is could impoverish us all overnight, is this thing going to continue to unwind towards that destination or will they get it to bounce back for some more years? We clearly arent going to get a gentle plateau, but will we get a yo-yo, a steep decline of a gentle descent into the lifestyles of the past? But I keep forgetting, sentiment leads the way, only partially in tune with fundamentals. Will history see these events as the days we were brave enough to cash the reality cheque, but it bounced?

 

[Dr Jon]

Dubai has been having a wobble lately

Hardly surprising really - it's like a Disneyland in the desert, but not as much fun.
Long-term viability was poorly considered if at all.
The firework display was good though.


First the boom, now the fireworks

ETA:
I see that a similar "realty reality" is dawning in India too.
Property development has been going mad here for the past six years or so, with new apartments, office blocks and malls springing up everywhere. I'm just wondering where the water, electricity and buyers are going to come from. Also, much of this is financed by (assumed?) remittances from Indian workers in the Gulf, many of whom I suspect will not be there for much longer.

 

[goebfwai]

I just heard alistair darling anounce that '(according to the world bank) the global economy will double in size over the next two decades'.

It could just be possible during a green technology/new energy boom.

And of course, it wouldn't surprise me in the slightest if Obama decides to dust off all the billions spent on space planetary research about colonising other planets, e.g. Mars. That would certainly herald the biggest global economic boom in American, possibly world history.

Would be kinda of like that Kennedy moment, the moon probes/landings etc.

Personally though, I think we should be looking after mother earth better first, before we go looking to mess things up elsewhere in the solar system!

 

[Barking_Mad]

40,000 people turn up for free food

Want one more palpable sign of a desperate economy?

An estimated 40,000 people came to a Weld County farm Saturday to collect free potatoes, carrots and leeks.

Cars snaked around cornfields and parallel parked along Colorado 66 and 119 early in the morning to get free food from the Miller family, who farm 600 acres outside of Platteville, about 37 miles north of Denver.

As this prolonged Indian summer continued, the Millers had decided to give away produce because so much was left over at the end of their annual fall festival. Any day now, a few deep freezes would kill it off.

They expected between 5,000 and 10,000 people spread out over a couple of days. Instead, they found themselves on Saturday morning inundated with cars and people with sacks and wagons and barrels ready to harvest whatever was available.

The Millers canceled the second day of the giveaway originally planned for today because, as Chris Miller put it, "the pickins' are very slim now."

At one point, 30 acres of family farmland had become a parking lot. Their crowd estimate of 40,000 plus was based on the number of cars. Sheriff's officials said they "wouldn't be surprised" if that count was accurate.

http://www.denverpost.com/news/ci_11052263

 

[8ball]

Could just be a sign that people like freebies.

 

[elbows]

Whoa another $800 billion rescue stateside! They are buying up the bad mortgage-backed securities it seems.

http://news.bbc.co.uk/1/hi/business/7748362.stm

 

[Barking_Mad]

how much is that now?

*lost count ages ago*

 

[hipipol]

Its fuck

We is all fucked

Am digging up the lawn to grow spuds this w/end

"Its the end of the world as we know it...tra lala la la!!!"

 

[hipipol]

ETA:
I see that a similar "realty reality" is dawning in India too.
Property development has been going mad here for the past six years or so, with new apartments, office blocks and malls springing up everywhere. I'm just wondering where the water, electricity and buyers are going to come from. Also, much of this is financed by (assumed?) remittances from Indian workers in the Gulf, many of whom I suspect will not be there for much longer.

It seems the cash for the office blocks is definately running out
http://www.reuters.com/article/IndiaInvestment08/idUSTRE4AN0QQ20081124

 

[elbows]

More grim news from the OECD, predicting a 25% rise in unemployment in OECD countries by 2010, a 25% rise from 34 million to 42 million.

http://edition.cnn.com/2008/BUSINESS/11/25/oecd.unemployment/index.html

 

[goebfwai]

Its fuck

We is all fucked

Am digging up the lawn to grow spuds this w/end

"Its the end of the world as we know it...tra lala la la!!!"

Unfortunately, I'm in a block of flats, but am putting my name down for an allotment. There's been a massive increase in demand for them over the past few years, but there are still spaces here and there. There are also new ones being set up now, although not enough as yet in my opinion.

 

[Barking_Mad]

My name is down for an allotment. Waiting list not that long and the council was clearing more land for availability. Hopefully sometime in the new year!

 

[goebfwai]

I am going to write to my local councillors, maybe get a petition started, re turning a local urban greenfield site that's lying dormant into allotments. Seems sensible that city folk should be helped to start growing their own more.

Haven't had time to read this yet, but looks worth a read:

Causes and Consequences of the Global Economic Crisis: A
Marxist-Socialist Analysis" by Murray E.G. Smith, Professor of
Sociology, Brock University, Toronto, Canada
http://www.bolshevik.org/economics/2008-11-25_EconomicCrisis.pdf

 

[gosub]

Unfortunately, I'm in a block of flats, but am putting my name down for an allotment. There's been a massive increase in demand for them over the past few years, but there are still spaces here and there. There are also new ones being set up now, although not enough as yet in my opinion.

http://www.landshare.net/

 

[Barking_Mad]

http://news.yahoo.com/s/ap/20081128/ap_on_bi_ge/meltdown_coming_soon

WASHINGTON – Black Friday's retail shoppers hunting for holiday bargains won't be enough to stave off what's likely to become the next economic crisis. Malls from Michigan to Georgia are entering foreclosure, commercial victims of the same events poisoning the housing market.

Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.

That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies' credit.

"We're probably in the first inning of the commercial mortgage problem," said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.

That's bad news for more than just property owners. When businesses go dark, employees lose jobs. Towns lose tax revenue. School budgets and social services feel the pinch.

Companies have survived plenty of downturns, but economists see this one playing out like never before. In the past, when businesses hit rough patches, owners negotiated with banks or refinanced their loans.

But many banks no longer hold the loans they made. Over the past decade, banks have increasingly bundled mortgages and sold them to investors. Pension funds, insurance companies, and hedge funds bought the seemingly safe securities and are now bracing for losses that could ripple through the financial system.

"It's a toxic drug and nobody knows how bad it's going to be," said Paul Miller, an analyst with Friedman, Billings, Ramsey, who was among the first to sound alarm bells in the residential market.

Unlike home mortgages, businesses don't pay their loans over 30 years. Commercial mortgages are usually written for five, seven or 10 years with big payments due at the end. About $20 billion will be due next year, covering everything from office and condo complexes to hotels and malls.

The retail outlook is particularly bad. Circuit City and Linens 'n Things have sought bankruptcy protection. Home Depot, Sears, Ann Taylor and Foot Locker are closing stores.

Those retailers typically were paying rent that was expected to cover mortgage payments. When those $20 billion in mortgages come due next year — 2010 and 2011 totals are projected to be even higher — many property owners won't have the money.

Some will survive, but those property owners whose loans required little money up front will have less incentive to weather the storm.

Refinancing formerly was an option, but many properties are worth less than when they were purchased. And since investors no longer want to buy commercial mortgages, banks are reluctant to write new loans to refinance those facing foreclosure.

California, New York, Texas and Florida — states with a high concentration of mortgages in the securities market, according to Fitch — are particularly vulnerable. Texas and Florida are already seeing increased delinquencies and defaults, as are Michigan, Tennessee and Georgia.

The worst-case scenario goes something like this: With banks unwilling to refinance, a shopping center goes into foreclosure. Nobody can buy the mall because banks won't write mortgages as long as investors won't purchase them.

"Credit markets have seized up," corporate securities lawyer Michael Gambro said. "People are not willing to take risks. They're not buying anything."

That drives down investments already on the books. Insurance companies are seeing their stock prices fall on fears they are too invested in commercial mortgages.

"The system has never been tested for a deep recession," said Ken Rosen, a real estate hedge fund manager and University of California at Berkeley professor of real estate economics.

One hope was that the U.S. would use some of the $700 billion financial bailout to buy shaky investments from banks and insurance companies. That was the original plan. But Treasury Secretary Henry Paulson has issued a stunning turnabout, saying the U.S. no longer planned to buy troubled securities. For those watching the wave of commercial defaults about to crest, the announcement was poorly received.

"He's created havoc in the marketplace by changing the rules," Rosen said. "It was the stupidest statement on Earth."

The Securities and Exchange Commission is considering another option that might ease the crisis, one that would change accounting rules so banks don't have to declare huge losses whenever the market declines.

But the only surefire remedy is for the economy to stabilize, for businesses to start expanding and for investors to trust the market again. Until then, Tross said, "There's going to be a lot of pain going forward."

 

[elbows]

Isnt the above story out of date? Because it says:

But Treasury Secretary Henry Paulson has issued a stunning turnabout, saying the U.S. no longer planned to buy troubled securities. For those watching the wave of commercial defaults about to crest, the announcement was poorly received.

But just this week they announced another 800 billion bailout that will involve buying troubled securities!

 

[david dissadent]

As widely expected Floridas economy is hitting a brick wall and its state finances are in deep trouble. Arnie over in California has already had the begging bowl out to the federal government, no doubt "he'll be back". But Florida is going to have to get its skates on if it wants a bail out before the treasury bond market keels over.

Their projections from just a year ago were way off. Their new math: In the next four years, the state will take in $31.4 billion less in taxes than expected. That's more than four times the size of the annual Miami-Dade County budget, the equivalent of building about 61 retractable-roof stadiums for the Florida Marlins, and almost half of this year's state budget.

These projected incomes are not accounting for a severe and prolnged US recession and the huge growth in non discretionary spending the federal government is now commited too.

link to the story.

For years, governors and legislators relied on population growth to create jobs, avoid tax increases and shield the state from recession. They saw Florida's population swell by 2 to 3 percent a year, enough to add a city the size of Miami or Tampa each year. By marketing itself as a low-tax, low-cost retirement haven, Florida literally bet its future on growth.

Every few years, an event would expose weaknesses in Florida's economic system: a recession in 1991, a school overcrowding crisis in 1997, a steep drop in tourism after the terrorist attacks of Sept. 11, 2001. But the growth machine always roared back to life -- until now.

With the mortgage crisis, credit crunch and flat-lining of population, the twin industries that buffered Florida through two previous recessions -- real estate and construction -- are weighing down Florida's economy, complicating a recovery and making it likely that Florida will be among the last to bounce back.

''This recession is not only going to be bad for us. It's going to be worse than the nation's,'' said David Denslow, a University of Florida economist. The primary reason: Florida's residential construction boom grew at twice its normal rate and ``we got overbuilt.''

They seem to believe this will only last a year

State economists predicted this month that the recession will linger throughout next year, with a gradual return to very slow growth in employment and population in 2010.

Floridas woes so far are largely to do with the construction industry siezing up. It tourist industry is likely to be badly hurt next year as US consumers cut discretionary spending and start having to save again. The huge falls in the stock markets are going to be a kick in the teeth for Florida as well, US folks are reliant on there "401k's" for there retirement, that is a kind of government supported (not funded) retirement plan where an employee gets a tax break and puts money into a retirement fund that basicaly invests on the stock market. Retirees are going to be alot poorer than they thought, there 401k's are getting a kicking and there other big investment, their houses, are collapsing in value. Trillions of dollars is simply ceasing to notionaly exist.

How quickly did Florida's once bright economy turn gloomy? The state led the nation in job growth in 2005 and now leads the nation in job losses. After five years of double-digit increases in housing starts and price increases, it's now second in the nation in foreclosure filings, with 444,000 homeowners in default, according to industry researcher RealtyTrac.

Florida had the lowest unemployment rate in June 2006. Now it has the ninth highest. And in the most important indicator of a productive economy, gross domestic product, Florida led the nation in 2005 and now ranks 47th.

If Florida starts increasing taxes then its retired population will have to start paying alot more money to the government and have less to spend on things. You can see why this could feed on itself.

Retirment for the baby "busters" may be alot less golf on manicured lawns adn trips round the Carribean than they envisioned.

 

[elbows]

how much is that now?

*lost count ages ago*

One day last week the BBC news said the global amount spent on bailouts etc was up to either 4 or 5 trillion, pounds I think.

We arent going to have a shortage of things to talk about in the coming years, thats for sure.

 

[free spirit]

We arent going to have a shortage of things to talk about in the coming years, thats for sure.

oh I dunno, fair few countries to go bankrupt as they fail to keep up with interest payments on their bailout induced national debts as the recession turns out to be much longer and deeper than they'd planned for... could even happen here the way we're going

I reckon there's gonna be enough to talk about to see us through 'global financial system implosion continues' threads 1, 2 and 3, I'm not even convinced the main course has gone in the oven yet, never mind been served...

 

[elbows]

Yes thats pretty much where I was coming from. And Ive feared for many months that the UK will be one of the worst hit, and stuff Ive read in the last month has reinforced this opinion. I think our currency is knackered, we'll have trouble servicing our national debt, and we'll have to be bailed out at some point in the next few years, maybe very soon for all I know.