Joined: Dec 27, 2004 Posts: 12559 Location: zombie horde wonderland
Posted: Sat Jul 12, 2008 4:53 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
mos6507 wrote:
Communism in its ideal form hasn't really ever caught on.
It may be a system which doesn't work in groups over about 150 individuals, which means it may simply not work in civilized cultures. These large groups of people seem to inevitably form hierarchies, and there goes your "communal" living.... _________________ No original ideas are contained in this post.
Posted: Sat Jul 12, 2008 5:05 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
DantesPeak wrote:
As shortonoil stated in a post about a week ago, there is an enormous amount of unrealized and pending mortgage related losses in the banking/finance industry.
Due to the fact that off-balance sheet derivative positions are usually not marked to market realities, WaMu or B of A can actually be insolvent but no one will know.
That's why they will do everything to cover up this mess as long as possible - probably with more government assisted takeovers.
Joined: Oct 23, 2004 Posts: 5913 Location: New Jersey
Posted: Sat Jul 12, 2008 5:08 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
nobodypanic wrote:
DantesPeak wrote:
hope_full wrote:
So, who is next? WaMu or Bank of America?
And what are y'all doing with your dollars these days?
As shortonoil stated in a post about a week ago, there is an enormous amount of unrealized and pending mortgage related losses in the banking/finance industry.
Due to the fact that off-balance sheet derivative positions are usually not marked to market realities, WaMu or B of A can actually be insolvent but no one will know.
Here's a good example. IndyMac had about $32 billion in assets and $1 billion in capital on March 31. Yet on July 11, we are told by the FDIC that IndyMac may have negative capital of $8 billion. That's a drop of $9 billion or 30% in the value of their assets.
If other major banks have to reduce their assets values by 30%, we will witness the worst banking collapse in history. That's why they will do everything to cover up this mess as long as possible - probably with more government assisted takeovers.
but how long do you think they can do that? and isn't it the case that every time they do save a bank, they devalue the currency in the process? at what point do we become like weimar germany over here?
They have postponed the collapse so far, at this point maybe even three years. My first post here on how bad things will get in the mortgage industry was made three and a half years ago.
Remember that Fannie Mae didn't even issue financial reports for a while, and then we were told it was ok after literally thousands of auditors tried to make sense of its books. Anyone who didn't sell Fannie stock after that - when it had no financial reports - gets no sympathy from me as the stock crashes to zero.
But yes, we probably do become like weimar germany - except you won't need those bulky wheelbarrels, just a bank account.
Frankly that day might come soon, or it could be postponed up to two years. My best guess is that the inflationary cycle spins out of control at new year's, being by then we will be six months into an ever worsening economic downturn.
Quote:
Fair Game
The Fannie and Freddie Fallout
By GRETCHEN MORGENSON
Published: July 13, 2008
IT’S dispiriting indeed to watch the United States financial system, supposedly the envy of the world, being taken to its knees. But that’s the show we’re watching, brought to you by somnambulant regulators, greedy bank executives and incompetent corporate directors.
“The real outrage is that none of this had to happen,” said William A. Fleckenstein, co-author of “Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve” and president of Fleckenstein Capital in Issaquah, Wash. “We did not have to ruin the financial system and ruin the financial lives of a huge chunk of the middle class in the United States.”
“It is crystal clear that the Fed not only made mistakes, they had the pompoms out, cheering for deregulation,” he adds. “Until people recognize why we are in this mess, I don’t see how we get out of this thing.”
A week ago, Bridgewater Associates, a research firm, estimated that losses from the credit crisis we’re now mired in might amount to $1.6 trillion when all is said and done.
We’ll have to wait years to see if this is accurate. But whatever the number is, it will also represent, in stunning red ink, the cost to society of financiers who are shortsighted and greedy and regulators who don’t regulate.
NY Times _________________ It's already over, now it's just a matter of adjusting.
Last edited by DantesPeak on Sat Jul 12, 2008 5:18 pm; edited 2 times in total
Joined: Oct 23, 2004 Posts: 5913 Location: New Jersey
Posted: Sat Jul 12, 2008 5:12 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
Twilight wrote:
DantesPeak wrote:
As shortonoil stated in a post about a week ago, there is an enormous amount of unrealized and pending mortgage related losses in the banking/finance industry.
Due to the fact that off-balance sheet derivative positions are usually not marked to market realities, WaMu or B of A can actually be insolvent but no one will know.
That's why they will do everything to cover up this mess as long as possible - probably with more government assisted takeovers.
Cash flow is the dynamite in the water. Northern Rock imploded not so much because of asset valuations, but because it was close to the point at which its liquid cash was insufficient to meet business needs. Models will not help zombie banks meet payroll. That end game can only be delayed.
Apparently the end for IndyMac was reached not when borrowers withdrew money, but they no longer had any assets to serve as collateral. They didn't borrow from the Fed because they had nothing to pledge for a loan.
So yes, if you can't meet your payroll you are sunk. But until they collapse the Fed/Government can issue new money laons and/or assume their liabilities and add to the federal debt. Then after a government takeover, the government can just run the printing presses even more to meet payroll. That's why I see the trend for the next two years towrads runaway inflation. _________________ It's already over, now it's just a matter of adjusting.
Posted: Sat Jul 12, 2008 7:17 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
DantesPeak said:
Quote:
That's why I see the trend for the next two years towrads runaway inflation.
Two years is possible, if near acrobatic agility can be performed by the FED, but not likely. To accomplish this it would require a near doubling of the already crushing $9 trillion federal deficit, and with a crumbled and dying credit market a truly helicopter approach would be needed to re-liquefy the financial industry.
With close to $1000 trillion in derivatives, $580 trillion of them being interest securitization instruments, a skyrocketing federal deficit would produce skyrocketing interest rates. The cascading defaults originating from the already zombie like monolines, which hold much of the $580 trillion in interest guarantees, could be catastrophic in days, if not hours.
I truly hope we have two years, but the failure of two or three more major banks, which is quite likely in the next few months, will undoubtedly produce a crisis that will bring this upside-down pyramid crashing down!
Joined: May 19, 2005 Posts: 797 Location: Merry Ol' USA
Posted: Sat Jul 12, 2008 9:07 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
Quote:
“The real outrage is that none of this had to happen,” said William A. Fleckenstein, co-author of “Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve” and president of Fleckenstein Capital in Issaquah, Wash. “We did not have to ruin the financial system and ruin the financial lives of a huge chunk of the middle class in the United States.”
Yes it did have to happen, as long as they were going to let all the real jobs leave the country. You couldn't very well let on to the middle class that you were going to push them into lower class, so the government helped engineer all kinds of "new" economies. First we were going to be a technical economy, so we wouldn't need those factory jobs anyway. Then we were going to be a service economy, so we really didn't need those technical jobs that bad. Then they decided to try to remake us as a construction society, since roofers can make $15/hr while Wallyworld associates only get 7 bucks.
All of this had to be done to cover up the fact that the US hasn't had a real economy, producing objects of value, for the last 20 years, as all those jobs were shipped out of the country. _________________ After fueling up their cars, Twyman says they bowed their heads and asked God for cheaper gas.There was no immediate answer, but he says other motorists joined in and the service station owner didn't run them off.
That's a pretty good botox injection but how long till it wears off?
And, where the Fark do we keep getting all this money from? Doesn't anyone in the damn media ask that question? _________________ After fueling up their cars, Twyman says they bowed their heads and asked God for cheaper gas.There was no immediate answer, but he says other motorists joined in and the service station owner didn't run them off.
Posted: Sat Jul 12, 2008 10:01 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
What bothers me most is how this keeps getting spun. The credit crunch is because of subprime borrowers, not greedy loan originators. IndyMac's failure is blamed on depositors making a run on the bank, not bad loan originations and operations. And the worst thing is that the mass media picks this crap up and runs with it.
The blame needs to be placed where it belongs -- with the greedy jerks who perpetuated this criminal behavior. At least give the people a clear target for their anger and frustrations. _________________ Civilization is a personal choice.
That's a pretty good botox injection but how long till it wears off?
And, where the Fark do we keep getting all this money from? Doesn't anyone in the damn media ask that question?
$15 billion is a small amount compared to the multi trillion $ balance sheet and derivatives of F & F. F & F have also provided (sold short) an incredible (maybe $2 trillion) worth of interest rate hedges which will cause billions of $s in losses to them if interest rates rose as little as one % point.
Basically the Fed sold about $300 billion in Treasury bills since November, plus lent about $300 billion more into existence that it didn't have, to get the $600 billion it needed to mostly exchange unsalable derivatives for cash advances to brokers/banks. These below market loans are a huge subsidy to financial companies, a subsidy that is paid by the taxpayers since the net profits or losses of the Fed are turned over or paid by the taxpayers. The same thing is true with the FDIC.
Anyway the amount of money the Fed can create is unlimited, but as creating money is highly inflationary, they had tried but failed to keep money creation as low as possible. They did lend about $100 billion into existence after 9/11 but took that back later on. Now the amount of new money being created smashes all prior records. _________________ It's already over, now it's just a matter of adjusting.
Posted: Sun Jul 13, 2008 12:16 am Post subject: Re: Housing & Economic Collapse - In Progress - #2
shortonoil wrote:
[ The cascading defaults originating from the already zombie like monolines, which hold much of the $580 trillion in interest guarantees, could be catastrophic in days, if not hours.
Posted: Sun Jul 13, 2008 12:33 am Post subject: Re: Housing & Economic Collapse - In Progress - #2
The interesting question is: Where is all the money coming form that gets injected into these corpses to give them the appearance of still breathing?
Clearly, the Fed's printing presses are glowing red right now, but in not a small part the Chinese and Asians are involved (and Europeans probably too). One has to wonder how long they are willing to do this.
The Chinese? I would expect them to hang in there at least until the fall, they don't want the Olympics to be disrupted by the US going *poof*, but afterwards?
I don't think Europe can afford it much longer either with the things happening in the UK and Spain now (not to mention the signs on the Horizon for Ireland and Italy, with France probably on the verge too, wonder about Germany and it's 82 million people).
Posted: Sun Jul 13, 2008 1:04 am Post subject: Re: Housing & Economic Collapse - In Progress - #2
I must say, Poland is doing pretty well, comparing to the mess described above.
Mortgage related disease is not widely spread here and with some effort it can be contained.
All should end up with few developers going bust and thats about all.
Banks are certainly not at risk.
Polish currency (zloty) is probably between strongest currencies on the world.
Few years ago 1USD was worth 4.5 zloty, now it is worth 2 zloty.
British pound (GBP) was worth as much as 7 zloty, now it is worth only 4 zloty, Euro deteriorated from 4.5 to 3.3 etc.
Petrol went up from 4.4 zloty last summer to 4.8-4.9 zloty now.
Nothing to moan about, I suppose.
Last edited by EnergyUnlimited on Sun Jul 13, 2008 1:09 am; edited 1 time in total
Posted: Sun Jul 13, 2008 1:08 am Post subject: Re: Housing & Economic Collapse - In Progress - #2
EnergyUnlimited wrote:
Banks are certainly not at risk.
Many banks in Europe didn't do such stupidity as in Spain and the UK at home either, and yet some German banks got caught with their pants down and Deutsche Bank is still trying to figure out how exposed they are.
Meaning: Even if there is no bubble in Poland, it can still hit home.
Posted: Sun Jul 13, 2008 1:25 am Post subject: Re: Housing & Economic Collapse - In Progress - #2
Snowrunner wrote:
Meaning: Even if there is no bubble in Poland, it can still hit home.
It can, but in different fashion.
So banks are perhaps safe because they were not investing in western mortgage market, perhaps because they didn't know how or their internal inertia prevented them from doing so or German banks "outcompeted" them in seizing up valuable American mortgage papers.
On the other hand some exporters here are beginning to suffer.
One of my good friends have closed down his company because of debt defaults of his American customers.
Nevertheless it was not bankruptcy, just shutting down business which was no longer viable.
Posted: Sun Jul 13, 2008 3:22 am Post subject: Re: Housing & Economic Collapse - In Progress - #2
Liar loans are the culprit. USC Title 10 Subsection 1014 covers false statements on loan applications, but you can bet that federal prosecutors are not going to put members of the chamber of commerce in jail. So, we will conjure up boogie men and place blame on some convenient scape goat. Too bad we can’t blame the communists. We have been here before. It is 1929 all over again.
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These large groups of people seem to inevitably form hierarchies, and there goes your "communal" living....
