capitulation day
+119...
...the story so far...
...a new american president has gone supernova...
...but...
the great british dictator has gone brown dwarf...
NOT THE END OF THE BEGINNING
...the weather is turning icelandic...
...but...
...so is the pound...
THE WHITE POUND
iain martin : "They don't know what they're doing, do they? With every step taken by the Government as it tries frantically to prop up the British banking system, this central truth becomes ever more obvious.
Yesterday marked a new low for all involved, even by the standards of this crisis. Britons woke to news of the enormity of the fresh horrors in store. Despite all the sophistry and outdated boom-era terminology from experts, I think a far greater number of people than is imagined grasp at root what is happening here.
The country stands on the precipice. We are at risk of utter humiliation, of London becoming a Reykjavik on Thames and Britain going under. Thanks to the arrogance, hubristic strutting and serial incompetence of the Government and a group of bankers, the possibility of national bankruptcy is not unrealistic." telegraph...
ninja : ..."All the growth in tax receipts linked to real estate and financial services was of course was nothing but an illusion. Those tax receipts are gone now, almost certainly never to return. Most of the financial firms won’t record profits for years and when they finally do, they will have years of losses to carry forward. The net result will be a giant, prolonged corporate tax shortfall.
In the meantime, the government is throwing good money after bad. This is of course plunging the country deep into debt. Just like in Iceland, although to a lesser degree relative to GDP, UK banks have liabilities in other currencies. As the pound goes into free fall, these liabilities explode in value crippling the banks. As the UK issues more debt to stabilize the banks, even more pressure is put on the pound. A vicious, debt death spiral could easily be sparked."...
jim rogers : ...“I don’t think there is a sound UK bank now, at least, if there is one I don’t know about it,” he says.
“The City of London is finished, the financial centre of the world is moving east.”
“All the money is in Asia. Why would it go back to the West? You don’t need London,” says Mr Rogers.
Mr Rogers thinks the pound is more vulnerable than the dollar or the euro.
He says the UK housing market is arguably in a worse state than that of the US, given pockets of strength in the US and prices that are sliding across the board in the UK.
Meanwhile, he says, the UK is in worse shape economically than the eurozone, where most countries are not big debtors and do not run huge trade deficits.
“If the UK discovers more North Sea oil, I might change this view,” he says. “But I don’t see that happening.” FT
ticker : ..."There is exactly one way to resolve this problem - the banks must be "crammed down" through forcible reorganization, and we must stop bailing them out and handing them money.
We cannot recapitalize them through taxpayer donations, for through that path we only delay the inevitable. We do not have the ability to "manufacture" or "borrow" the three to five trillion dollars it would take to cover those losses - a full fifty percent increase in our federal debt, on which we would pay hundreds of billions of dollars a year - forever - being a permanent drag on GDP. Such a path will only lead to more insolvency as the crimp on GDP will inevitably lead to more job losses, more credit losses and more malaise, ultimately resulting in the very collapse that the proponents of this path claim to be trying to avoid."...
THE DAY AFTER TOMORROW
matthew lynn : ..."One thing is clear, though: The world won’t go back to the debt-fuelled, globalization-crazy world of 2007."
“Unlike previous postwar contractions, the problem the global economy now faces does not primarily stem from a temporary mismatch between output and demand,” Stephen Lewis, chief economist at Monument Securities Ltd. in London, said in a note to investors. “It arises, rather, from the breakdown of the financial system, and the process of wealth-destruction that has set in train.”
Three Tasks
The question now is how Obama can take the lead in fixing that. Here are three places he could start.
First, ditch ideological hang-ups. The debate on how to move on from the credit crunch is fast turning into trench warfare between the traditional advocates of big government and the die- hard supporters of the free market. That isn’t getting us anywhere. The free-market camp needs to recognize that there wasn’t enough supervision or regulation of the financial markets. We are going to need more rules.
Likewise, the big-government camp needs to understand that more spending and government meddling won’t fix much either. We don’t want to lose the growth, dynamism and opportunities that flowed from the free movement of money, ideas and people across borders. The path to be steered will have to lie somewhere between the two extremes.
Rules for Banks
Next, new rules on the way banks operate are needed. It is clear that the global banking system had ignored the risks building up over many years. The incentive systems had become perverse. New capital requirements will have to be devised for banks to stop excessive risk-taking. Institutions such as hedge funds and private-equity firms will have to be brought into the system: They play too big a role in the financial markets to be left unregulated. And the rules need to be global. There is no point in changes being made country-by-country. That way we lose all the benefits of globalization.
Most importantly, the imbalances need to be fixed. Too much capital was being recycled through the global financial system. Some countries -- China and Germany, for example -- exported and saved too much. Others -- the U.S. and U.K. -- imported and borrowed too much. That will have to be rectified. It is no good having one lot of countries telling everyone else to consume more unless they are also willing to consume less. That will hurt. But there is no way of avoiding it. Where the last president had a war on terror, this one needs a war on financial bubbles, and that requires a more balanced global economy."bloomberg...
peteynation : foolin alla the people alla the time is difficult...
...1997 - 2007...
smoke an mirrors...profits of wax...
...less of the benefit...
...more of the tax...
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