capitulation day
+210...
...here in palookaville...
...the talk is all about the green shoots...
THEY THINK IT'S ALL OVER...
...of course they don't...
...but...
...what they think and what they say...
...are two different things...
THE BANKS ARE BUST
...this is not often alluded to...
...there will be no return to boom...
...this time it really is different...
ONCE BITTEN, TWICE SHY
...they say that the consumer will return...
...that banks will lend as before...
...that people will borrow again...
...like they did last summer...
...i don't think so...
We are not even half-way through the
banking crisis - IMF
..."The simple truth is laid out in page 33 of the Global Financial Stability Report , published today in Washington: "if banks were to bring forward to today loss provisions for the next two years, before expected earnings, US and European banks in aggregate would have tangible equity close to zero."In other words, the entire global banking system would be bankrupt - kaput - if its institutions immediately wrote off all the toxic assets still sitting in their vaults without any government assistance...." Telegraph...
...this from the big picture...
..."So we keep the system going. Now, where are we today?
We are at the Great Deleveraging.
We are seeing massive losses and destruction of assets, on a scale that is unprecedented. There was massive destruction of assets during the Great Depression, which caused a lot of problems, and we are seeing the same thing today. We are watching trillions simply being poofed (another technical economics term — which will drive my poor Chinese translator crazy!). We are watching people pay down their credit lines, which is one way of saying the supply of money and credit is shrinking.
This is not just in the US, but all over the world. Because when you start adding European cash-to-credit, and Japanese cash-to-credit, and Indonesian and Chinese cash-to-credit, it becomes multiple tens of trillions, and we are watching a goodly portion of that credit be vaporized. So we — individuals and businesses — are trying to find that $2 trillion in real cash and get some of it to pay down our debts. We are reducing that massive leveraged money supply down to some smaller number. We are hitting the Blue Screen of Death. We don’t know what it is going to reset to, but we have permanently seared the psyche of the American consumer, and it is going to get reset to some lower number, about which I will speculate in a minute.
Now to give you some idea of how important credit was in our recent period of economic growth — and I keep using this slide, but it is an important slide because it shows you what would have happened in the economy without mortgage equity withdrawals. The red lines are what GDP would have been without MEWs. Notice that in 2001 and 2002 we would have had negative GDP for two years, that’s 24 months. It would have been as long as or longer than the current recession. Not quite as deep, because we had the Bush stimulus and Bush tax cuts at the time. The Bush tax cuts were very important in keeping the economy rolling over in 2001 and 2002.
But notice that the recovery for the next four years would have been under 1%. We would have had under 1% GDP for four years running, without mortgage equity withdrawals, without people being able to spend more. That doesn’t even count the leverage we increased on our auto loans, on credit cards — you saw the two charts that Louie [Gave] and Martin [Barnes] used yesterday about the growth of credit, and we are now seeing it in reverse. Do you think George Bush would have stood even a small chance of being reelected without mortgage equity withdrawals?
GREEN SHOOTS
Drives my green age; that blasts the roots of trees
Is my destroyer...." dylan thomas
...IT IS NOW
..."In other words, if you thought the immense amounts of taxpayer cash funnelled into the system over the past couple of years was enough to bring us back to good health, think again.
It is an extremely worrying verdict, particularly coming at a time when many had been assuming that green shoots were starting to sprout and the recession was coming to an end.
But it underlines one simple but undeniable truth:
that this recession is different.
It is the consequence not of a simple one-nation housing crash or a consumer slowdown but a catastrophic collapse of the financial system. And with that system still in a wreck normal service will simply not be resumed without more costly bail-outs - or else we must accept the consequence that money will be far more expensive to borrow in the future, and that economic growth will be far less in the future." Telegraph...edmond conway blog...
petey : it were me wot done the italics an stuff...
