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Global financial system implosion begins

g force said:
Indeed....my biggest fear though - speaking for personal experience having worked on a tidal energy project - is that over the last few years there are companies making massive strides in renewabale energy...wind, tidal, traditional wave, solar (as in get the unit cost down to a decent/affordable level). Now is the time to accelerate that investment but funding is already starting to be cut off meaning we could see some amazing stuff not being developed to it fullest that could be a huge benefit to soceity overall.

Instead we get a third runway at Heathrow...whooppee fucking do.
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Somone was suggesting to me another big project that should be considered. Rebuilding the railways. From scratch. Everywhere. A mag-lev system or at least something like the French, that would stimulate quite a bit of economic growth, improve transport speeds, business and social contact and connections. The system we've got is basically a Victorian network.
 
A Dashing Blade said:
Gut feeling, nothing more. But note I'm talking about two years till it bottoms out, then I would guess another 2 -3 years of flatlining so call it 5 years in round numbers before the start of a pick-up.

(this in the context of how I see financial markets developing, which, to cut to the conclusion, ends in fragmentation and, paradoxically in the current political climate, the creation of numerous small hedge-funds in which big banks have equity stakes.)
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Ah right, cheers for the answer, much appreciated. If you have a moment how do you view the state of the global markets once this is over in say ten years time?
 
Kid_Eternity said:
Ah right, cheers for the answer, much appreciated. If you have a moment how do you view the state of the global markets once this is over in say ten years time?
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What goes around comes around. The City/Finance/Wall Street (however you wanna define it) is driven by the peronal acculmulation of money. This has been so since (at least) the 16th/17th century. Nothing changes. Why do peeps this time is any different (this in itself being a symptom of every bear market I've personally seen since 1985)?
 
A Dashing Blade said:
What goes around comes around. The City/Finance/Wall Street (however you wanna define it) is driven by the peronal acculmulation of money. This has been so since (at least) the 16th/17th century. Nothing changes. Why do peeps this time is any different (this in itself being a symptom of every bear market I've personally seen since 1985)?
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True. Doesn't stop me being pissed off subsidising the pricks through my taxes.
 
Oh dear. :eek:

The US economy shrank by 6.2% in the last three months of 2008, official figures have shown, a far sharper fall than had previously been reported.

Plunging exports and reduced domestic demand amid the severe recession dragged the figure down from the 3.8% estimate the government gave earlier.

The decline was much worse than analysts had expected.

In 2008 as a whole, the economy grew by 1.1% the Commerce Department said, the slowest pace since 2001.
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http://news.bbc.co.uk/2/hi/business/7915040.stm
 
Everywhere. A mag-lev system
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That is a wicked idea. I believe scientists believe they could get the trains up to 3000 MPH!

I'd be totally up for seeing the old rail system re-built with mag-lev trains.
 
Don't think this (from The Economist) has been posted yet.





A SMALL stretch of land, a two-hour drive from end to end, reveals much about the economic transformation of a vast country. This slice of southern China runs from Guangzhou, the old treaty port reserved for foreigners before Mao expelled them, to Shenzhen, the city established after Mao’s death as an experiment in private enterprise. Over the past decade it has become one of the world’s fastest-whirring economic engines—a global hub in the manufacture of clothing, shoes and electronics—serviced by tens of millions of migrant workers.

Now the region is undergoing an equally remarkable contraction. In the past year thousands of factories, perhaps one-third to one-half of the total, have closed. Reliable statistics are hard to come by, not least because many factories operate in a legal netherworld, but the severity of the slump is plain. The flow of migrants has gone into reverse....




......Fearful of the social consequences of widespread unemployment, both local and national governments have backtracked on policies put in place between 2006 and 2008 that raised private companies’ costs. Exporters’ tax rebates have been restored, for example; and new laws on wages, work rules and benefits that added costs a year ago are turning out to be more flexible than they at first appeared. Around Dongguan, local officials no longer seem bothered about pushing the region towards higher-value-added products. Makers of labour-intensive goods, such as apparel and toys, find that they are no longer under pressure to move away. A strike that the municipal government would have all but encouraged for much of 2008, it would now help to settle. None of this has come anywhere near offsetting the decline in orders. Worse, the malaise may go far deeper than the short-term effects of a slump in demand.
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http://www.economist.com/research/articlesbysubject/displaystory.cfm?subjectid=478048&story_id=13145129



It's a wee bit gloomy.



Woof
 
I think we are about to see the implosion of the Web 2.0 world as well. VC funding seems to be drying up, a lot of Web 2.0 companies have overheads which far outstrip their earnings (if any).
Stupid money thrown at non-profitable tech companies is going to way of the dot.com bubble burst...
 
Yep it's long been speculated that Web 2.0 is actually the second dot com bust to come...
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I really wouldn't be surprised, it's been a while coming and I think it's time was due even if there hadn't been a financial crises.
It could have a pretty nasty impact on the economy though, on top of what is happening at the moment should the house of cards come crashing down.

I should think a lot of companies like rackspace etc. make a lot of their money of the back of the Web 2.0 boom.
 
Wolveryeti said:
It struck me recently that this is another one you could lay at the door of the wonderful IMF.

One consequence of the draconian 'rescue' packages they offered the victims of the 1997 banking crisis was a desire in Asian countries to never be placed in a position of need again - hence developing export-led economies based heavily around saving, and in particular, hoarding large amounts of foreign currency. This money has found its way back to the West, inflating the bubble which has just burst.
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They certainly countined to put all their eggs in the "all out for exports" basket in part because of that.

I read something interesting earlier today arguing that the world's response to this recession will be like the UK's response to the Great Depression. Heavy manufacturing up north gets hammered; light manufacturing and services down south suffer but not quite so much. Replace the north with East Asia, and the south with the West and you've got it...
 
goebfwai said:
Local food: success is 100% possible

Study shows Russian households (inclusive of both urban and rural) collectively grow 92% of country's potatoes on their garden-plots, the size of which is typically 600 square meters [0.15 acres] for urban households, and typically no more than 2500 square meters [0.62 acres] for rural households.

http://cluborlov.blogspot.com/2009/02/local-food-success-is-100-possible.html
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Yes - one of the few good things about soviet-style communism. Everyone got an allotment.
 
Heh!


God bless AIG.


Back in the days that were, I used to hang out with dozens of actuaries for a living (they worked for insurance companies, rating agencies, consultancies, etc. - I headhunted).


I knew these guys (AIG,) were fucked back in late 2005 when I gained some insight into what they were doing with mortgate "guarantees" - bundling sumprime debt into solid mortgages, buying a Triple A rating and flogging it on.

To me it seemed like madness and inevitably unsustainable.

I heard tales of mixing up pork belly futures with Hang Sang Index options with fuck knows what and bundling it into fuck knows what else and masking it with luverly prime somethingorother and getting a AAA slapped on it for the appropriate fee.


And AIG Head Office knew they were exposed way beyond their capacity should things begin to wibble - which they were worried about - and yet, of course, kept quiet for as long as possible.


I know it's uncool to quote oneself, but here's A Brief History of AIG........





Jessiedog said:
16-09-2008, 01:23am [GMT+8:00]


Jessiedog
Keeping the faith. Join Date: Aug 2002
Location: A pimple on da bottom of China
Posts: 7,288





And AIG, FFS?

US$ 45 billion losses over the last few quarters and now has a US$ 20 billion handout from the US taxpayer.

I know the person that bundled these mortgages for them, got the "AAA's" and exposed them to this risk.

Senior management have known about the problem since at least 2005 and were worried then and trying to mitigate some of the risk while keeping it very quiet - and predominately trying to maintain the gravy train.

They essentially did nothing but keep making tens upon tens of billions of US dollars, despite being hugely concerned about the consequences.

They knew the risks.

They didn't care.


It's fraud on the grandest scale.



And now they get a US$ 20 billion taxpayer handout?


Class!




Woof
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bi0boy said:
I think you will find that it's been allowed to take a $20 billion loan from it's subsidiaries, not from the government.
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Jessiedog said:
16-09-2008, 01:55am [GMT+800]



Just wait and see, OK?


Read my post, AIG are fucked. I should know.


And the Bush administration was not "asleep at the wheel" in all of this, it was at best totally complicit and at worst driving this fucking madness.


The US Treasury Secretary is live on TV right now......


.... he is stuttering worse than he ever did and looks terrified.



Anyway....


....Start growing your own vegetables peeps - there's much worse to come.





Woof
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Jessiedog said:
17-09-2008, 13:00am [GMT+8:00]



Well. Well. Well.


Didn't take long did it?


Eighty five thousand million US dollars of taxpayers money.


Billions upon billions of dollars of PROFIT have been made over the years and that money went into private pockets.

Now that there are USD 85 billion of LOSSES, that, of course, comes out of the public pocket.


Oh jolly hockey sticks!


After syphoning hundreds of billions from the public in order to transfer it to private mercenaries running amuck killing hundreds of thousands of innocent peeps in Iraq, now we have another massive transfer from the public purse, stripped to give to the private financial institutions.


The Bush administration is culpable for the greatest fraud and theft in the history of humanity.





Woof
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kabbes said:
...what they have been sold as AAA investment turns out to be infected with subprime (for which you can hardly blame the purchaser that thought he was getting AAA in good faith). All of a sudden they look financially shaky without *necessarily* any mismanagement.

Of course, mismanagement is also a possibility. It's just not the only possibility. Personally, I don't think it is even the most likely possibility in this specific case.
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Jessiedog said:
17-09-2008, 16:27am [GMT+8:00]



Given the scandals AIG have been involved in over the last few years, I would have thought that mismanagement is virtually a given.


Not to mention that AIG was a leader in the field of bundling worthless mortgages into "AAA" investments (through collusion with the Rating Agancies,) and then selling them on.


Not to worry though, eh? Mismanagement, madness or otherwise, there's plenty of hard-earned taxpayers money to chuck around - and at least the board of directors at AIG are still getting paid.


I'm wondering how culpable the Rating Agencies are - they were the ones being paid to put "AAA' stamps on "encrusted crap" - would a class action lawsuit be in order?


Woof
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Jessiedog said:
17-09-2008, 16:43am [GMT+8:00]


.........



"Though he left the company a few years ago after an accounting scandal, Mr. Greenberg’s fortune remains locked up with A.I.G., in which he has a stake of about 11 percent through various holdings, according to Bloomberg News.

Early in 2005, questions arose about financial transactions that had the effect of making the company’s earnings look better. Mr. Greenberg resigned as chief executive after regulators sent a wave of subpoenas to the company; eventually A.I.G. restated earnings covering a five-year period. His successor tried to restore confidence in the company but his efforts did not meet with investor approval and he was replaced this summer, after the company announced that it lost $7.8 billion in the first quarter of the year, the biggest loss in its history. In August it announced that it had lost another $5.3 billion in the second quarter.

A.I.G.’s problems rest in the company’s London-based financial products unit, part of its financial services group, which is exposed to securities tied to the value of home loans — the same kind of securities that forced Lehman Brothers into Chapter 11 bankruptcy proceedings on Monday. The financial products group sold credit-default swaps, complex financial contracts allowing buyers to insure securities backed by mortgages. Many of the buyers were European banks. As home values have fallen, the value of the underlying mortgages has declined, and A.I.G. has had to reduce the value of the securities on its books.

The company has other forms of real estate exposure. One subsidiary, American General Finance, makes home loans and has suffered along with the housing market.


Another subsidiary, the United Guaranty Corporation, provides mortgage guarantee insurance.


Still other units buy mortgage-backed securities directly."


http://www.nytimes.com/2008/09/17/bu.../17aig.html?hp


............





I could see what was happening back in early 2005. The whole thing was a pack of cards, inevitabley destined to collapse.


But hey, at least the board of directors are still getting their inflated salaries.


Woof
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From the Lehman thread:

http://www.urban75.net/vbulletin/showthread.php?t=261085&highlight=United+Guarantee



This is going to get much worse.


:(



Potatoes are good to plant.


:)


Woof
 
Wolveryeti said:
Yes - one of the few good things about soviet-style communism. Everyone got an allotment.
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As long as you don't use up proper agro land to do it. All that land could be used in a farm and make something like 3 or 4 times what the home grower can make.
 
Bernie, please produce from your sleeve that research that shows greater productivity per hectare from smallholdings with many crops compared to monoculture industrial farming? I don't have the google in me right now...
 
goebfwai said:
How much worse? How do people see things panning out if the recession widens and deepens...what events could worsen or lessen it's severity or duration?
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A quote from a friend (who works in research at a big bank, but who's only been in the banking sector for less than a year so has relatively fresh eyes):
Feels like we are breaking natural 'support levels' so the next leg down could be material. US employment on Fri could be the catalyst.

We are back to asking: where does this stabilise? I need some more thinking time on that one but I am exploring aggregate debt ratios . . .
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That in response to a mail from me about AIG and the stock market falls yesterday.

The problem now is that the losses from the real economy (jobs, production) and the leveraged losses on those are spiralling down past the monetary injections and bail-outs. So it's a hugely unstable (non-)equilibrium and could end just about anywhere from here and a long way down (maybe 10% of global GDP, which would mean 20% in our economies, stock markets at half of current levels etc).

Or things could stabilise relatively soon. But the US housing market hasn't stabilised (although prices are now much more reasonable compared to where they were in terms of earnings ratios, and are beginning to approach long-term averages, they could easily overshoot).

The one saving grace is that there's not massive retreat to protectionism yet, which it's widely acknowledged together with lack of bank guarantees, led to the Great Depression spiralling out of control globally.
 
slaar said:
A quote from a friend (who works in research at a big bank, but who's only been in the banking sector for less than a year so has relatively fresh eyes):

. . .
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Apols slaar and, clearly I've (prolly) not met your guy but . . . . :D
 
slaar said:
A quote from a friend (who works in research at a big bank, but who's only been in the banking sector for less than a year so has relatively fresh eyes):

That in response to a mail from me about AIG and the stock market falls yesterday.

The problem now is that the losses from the real economy (jobs, production) and the leveraged losses on those are spiralling down past the monetary injections and bail-outs. So it's a hugely unstable (non-)equilibrium and could end just about anywhere from here and a long way down (maybe 10% of global GDP, which would mean 20% in our economies, stock markets at half of current levels etc).

Or things could stabilise relatively soon. But the US housing market hasn't stabilised (although prices are now much more reasonable compared to where they were in terms of earnings ratios, and are beginning to approach long-term averages, they could easily overshoot).

The one saving grace is that there's not massive retreat to protectionism yet, which it's widely acknowledged together with lack of bank guarantees, led to the Great Depression spiralling out of control globally.
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Thanks. Things do seem to be spiralling down and becoming self-reinforcing. I suppose like a tornado, it must run out of energy and momentum at some point. I think globalisation, the information age of instant news, fast communication and capital movements has heightened the rapidity of the contraction. We can only hope I suppose that the opposite will hold true and that those same forces will help contribute to speeding up the recovery.
 
A Dashing Blade said:
Apols slaar and, clearly I've (prolly) not met your guy but . . . . :D
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He's a sharp one, but I take your point! I am just comparing him to another mate of mine who sold CDOs for five years (for vast bonuses) and readily admitted he really had no idea what he was selling. But I am aware that's a biased sample.

Any of my post you disagree with? I like this graph particularly:

bear-markets-comparison-xlrg.gif
 
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