World Financial Crisis Redux

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DrConway
World Financial Crisis Redux

http://www.independent.co.uk/news/business/news/we-must-print-more-money-says-bank-1625947.html

 The Bank of England is now officially printing money. Narrow rentier-focussed inflation control is dead. Hurrah England!

 

DrConway
M. Spector M. Spector's picture
DrConway

NorthReport wrote:
If you are planning to sell your home in the next 5-10 years, get out while you can.

Coming to some town near you, sooner, rather than later.

I had to laugh when recently reading Vancouver Real estate Promoter Bob Rennie's current advice was don't sell your home now if you don't have to. What he was actually saying is he can't sell his product at a profit now and he doesn't want homeowners competing with him for the measely sales, developer fire sales or not,  that are taking place across the Lower Mainland.

I still have no sympathy for those folks that got dollar signs in their eyes and figured they could buy a house and then flip it in a year.

Whatever happened to the ethic of paying for something you intend to use?

Cars depreciate so fast they're almost as bad as computers for resale value, yet you don't see people walking away from auto loans just because the car's worth less a year later than when they bought their cars.

But heaven forbid a house fall in value! Heaven forbid that you buy something, have to borrow money to purchase the asset, and then stick to repaying the loan!

Land price increases are not a God-given gift to homeowners. If they have negative equity - too bad! They didn't purchase a boat cruise or some intangible service they can get a refund on. They purchased a roof over their heads - something physical and usable! Just like a car. Physical and usable.

I agree that the very idea of a housing market is ridiculous given that land is no longer essentially infinite in today's world, but in the context of a housing market and the need to purchase housing, I find it utterly ridiculous that people think it is moral and ethical to simply quit paying for the place one has chosen to live in just because the dollar signs in one's eyes blinded one to the facts about paying for something one intends to use. 

ElizaQ ElizaQ's picture

 I agree Dr. Conway.  That mentality is really pushed though. Not just through the real estate busness but through many cultural and consumer oriented fare.  Just watch any home reno show and your more then likely going to hear, this reno is going to increase the resale value of your home ot don't do this because it will make your house harder to sell in the future.  I know for instance that kitchens and bathrooms sell houses because I'm told that even by the service rep at my local home improvment store.   "You want to paint your kitchen pink with yellow polkadots?  Are you insane? Don't you know what that will do to it's value?"  But *I* like pink with yellow polka dot, it's my 'home'.   Smile  I exagerate somewhat but not really that much.   The idea that your not just renoing for yourself but for all the people that will come after you is such a common refrain that it's basically part of the 'common sense' of renoing and decorating to the point where it's all part of the calculations about deciding whether this stove, vanity or type of sink will be worth it or not.  

  A house is no longer a home it's an investment that one just passes through on the way to something else.  

 I ran into this when I was buying a house.  I actually didn't go with the first real estate agent I saw and talked too,   because he couldn't get past looking at from this point of view and actually argued that my view on the criteria that I was looking for was just going to get me into trouble with my future house market viability.  Not the exact words and he was very polite about it but that was basically it.  So buying a fixer upper was on really viable and smart is the costs of fixing it came in under whatever the future market value would be with those costs, doing anything otherwise, I was an idiot.  One of the things I really wanted was land where I could grow things and had specific crietera about what that land should consist of, the house was only one priority and not even the main one.  I got a real nice talking to about 'values' and the resalability of those types of improvements being pretty much nil in the market.  I would spend more then I could get back blah blah.     Yes I know all that thank you but I'm buying a HOME where I am going to actually LIVE. Yeesh. 

Anyways the guy I eventually worked with understood  and didn't treat me as if I was some sort of ignorant loon for not caring so much about what was going to happen when and if  I sold it in some unknown future.  I really could care less what the current land value is because the land I'm on has value that currently isn't as recognized as valuable in that market.  

 

 

DrConway

Bank of England to begin "Quantitative Easing"

One thing I'm particularly chuckling over is this:

Quote:
Gieve also said the Bank made mistakes by not paying enough attention to rapidly-growing bank lending and soaring property prices. “With hindsight we should have been more worried about the growth in credit and the rise in asset prices than we were,” he said. “You have to take asset prices and asset markets more seriously than we did.”

Well, blow me down with a feather. Really?

Too bad the dumb bastards had to watch the stock market get all the glitz while the real economy lagged, and then watched housing prices get completely out of control before they realized that consumer price inflation is probably a lot less harmful, economically, when taken in mild doses.

 

George Victor

I never moved in those circles, and  have wondered just how singularly self-posessed one would have to be to not raise such questions in their polite, inner-directed  society.

Wonder what they read besides the market news?

DrConway

Bank of England set to pump cash into economy to avoid deflation

The era of central-bank autonomy is coming to a close as well, I think. The article says thus:

Quote:
The radical measure will also mark a watershed in the Bank's history since it was handed independent control of interest rates by Gordon Brown nearly 12 years ago. Until recently, that was seen unquestionably as Mr Brown's masterstroke. On a bright morning on May 6, 1997, the then Chancellor announced that he was surrendering to the Bank his power to set base rates.

It was a landmark moment. In the following decade, the country grew used to the idea that it was no longer the Treasury, but the Bank, that was at the economy's helm. On one Thursday each month, the hand of the "Old Lady of Threadneedle Street" was felt on the tiller as the Bank's decisions emerged at midday.

Quote:
Since the MPC has had to ask the Chancellor for permission, critics believe this undercuts its autonomy. Mr Darling will set a maximum amount of money to be created. Yet it will still be the nine MPC members who decide when to act and to what extent. It is a grey area, but unquestionably the Chancellor's hand is creeping back on to the steering wheel. An acid test will be whether the MPC can decide by itself when to stop.
 

 

The next major event would be for either the Fed or for the ECB to come under direct governmental control, directed by the government in the interests of more than just rentiers.

Refuge Refuge's picture

DrConway wrote:
Land price increases are not a God-given gift to homeowners. If they have negative equity - too bad!

I do agree with you that the amount that people expect houses to go up is ridicoulous however that is where my agreement ends when it comes to "house flippers".

A car is usually so broken after 20 years of use that it is not drivable (I have driven 4 cars to the car graveyard because I had them at the end of their lifecycle). A house is still usable with maintenance after hundreds of years.

House flippers are not the homes owner. They are there to do a service, one that I find valuable.

I think people who fix up older houses are actaully doing a service by allowing a house that in some cases are in so much disrepair that it would have been torn down for a new house.

Houses should remain stable because they are reusable for a lot longer than a car and any improvements to it should increase their value because then it will be usable for a lot longer.

I'm tired of people thinking that a house should be garbaged after a certain number of years and be bulldozed for newer houses that are "worth more". We should be fixing up what we have and if someone buys an older house to fix it up to be better than when they bought it they should get a new price for the better house that they fixed it up to, not a bad price because it is old and should be worth less than a newer house.

I do agree if you are living in the house you shouldn't base decisions on increases in value and resaleability (this coming from a girl who's father wouldn't let her put posters up because he didn't want holes in the wall for when he resold it) however because a house is reuasable for so long I think they should be able to maintain its value because it is just as valuable as a new house and sometimes more so.

Frustrated Mess Frustrated Mess's picture

Quote:

BRUSSELS (AFP) — British Prime Minister Gordon Brown said Sunday he will head to Washington this week hoping to secure President Barack Obama's backing for a "global grand bargain" to save the world economy.

"As part of the grand bargain the whole world must agree, as Europe has done, on the need to reject protectionism, which is the road to ruin and the route to deeper recession," Brown said after an emergency EU summit in Brussels.

He said there was European "consensus" that united action was required to tackle the deepening recession.

 Save the Wal-Mart economy or bust!

DrConway

Quote:
The grand bargain should include new regulatory standards for financial markets and cross-border supervision of financial institutions, including hedge funds, he told reporters in Brussels.

Would it be too much to hope for a Tobin tax, or even better, outright controls over capital flows? 

George Victor

 

At ll a.m., the TSX is down more than 400 points, more than wiping out last week's  gains.

The bailout  of insurers stateside continues.

NorthReport

The useless CATO Institute should close up shop.

 Revenge of the Glut 

http://www.nytimes.com/2009/03/02/opinion/02krugman.html?_r=1

Mr. Bernanke cited “the depth and sophistication of the country’s financial markets (which, among other things, have allowed households easy access to housing wealth).” Depth, yes. But sophistication? Well, you could say that American bankers, empowered by a quarter-century of deregulatory zeal, led the world in finding sophisticated ways to enrich themselves by hiding risk and fooling investors.

And wide-open, loosely regulated financial systems characterized many of the other recipients of large capital inflows. This may explain the almost eerie correlation between conservative praise two or three years ago and economic disaster today. “Reforms have made Iceland a Nordic tiger,” declared a paper from the Cato Institute. “How Ireland Became the Celtic Tiger” was the title of one Heritage Foundation article; “The Estonian Economic Miracle” was the title of another. All three nations are in deep crisis now.

For a while, the inrush of capital created the illusion of wealth in these countries, just as it did for American homeowners: asset prices were rising, currencies were strong, and everything looked fine. But bubbles always burst sooner or later, and yesterday’s miracle economies have become today’s basket cases, nations whose assets have evaporated but whose debts remain all too real. And these debts are an especially heavy burden because most of the loans were denominated in other countries’ currencies.

 

Doug

George Victor wrote:

At ll a.m., the TSX is down more than 400 points, more than wiping out last week's  gains.

Good thing I'm not retiring for at least 30 years. I'll need it. I feel sorry for anyone who has to much sooner. Frown

DrConway

I admit to a minor amount of Schadenfreude at the way Ireland went from "Tiger" to "Basket Case", and it really does strike me that those countries that so aggressively pursued a boom were the ones that most quickly went bust.

Any sane person knows that capitalist economies are inherently susceptible to boom-and-bust cycles. That's just the nature of unregulated economies, and the United States' own history bears this out many times in the 19th century. It doesn't take reading Karl Marx to realize that the natural response to this would be to build in counterweights and countervailing mechanisms to moderate out the booms and busts, but the typical response of political conservatives has been to put in place mechanisms which enhance the booms and worsen the busts; their avoidance of responsibility is also just as typical, as they blame everybody but themselves and their cronies. 

Fidel

It's like Wall Street and the western banking cabal have basically taken over the reins of resource allocation, and our so-called elections have become little more than stooge-offs for bought and paid for politicians

Doug

I enjoyed this trader's face from the NYSE:

Impending eye-splosion!

Doug

Great environmental news - not so good economic news. The US car market won't ever be the same again, says Jeff Rubin at CIBC for what seems a very good reason. If there is an economic recovery, gas prices go right back up to what they were last year, because there's been no change in supply.

http://research.cibcwm.com/economic_public/download/feature1.pdf

Fidel

[url=America">http://www.globalresearch.ca/index.php?context=va&aid=12517][...'s Fiscal Collapse[/url]

[IMG]http://img.photobucket.com/albums/v697/rabblerabble/12517.jpg[/IMG]

Quote:

In actuality, what we are dealing with is the most drastic curtailment in public spending in American history, leading to social havoc and the potential impoverishment of millions of people. 

The Obama promise largely serves the interests of Wall Street, the defence contractors and the oil conglomerates. In turn, the Bush-Obama bank "bailouts" are leading America into a spiralling public debt crisis. The economic and social dislocations are potentially devastating. . .

War and Wall Street

This is a "War Budget". The austerity measures hit all major federal spending programs with the exception of:  1. Defence and the Middle East War: 2. the Wall Street bank bailout,  3. Interest payments on a staggering public debt. 

The budget diverts tax revenues into financing the war. It  legitimizes the fraudulent transfers of tax dollars to the financial elites under the "bank bailouts". 

The pattern of deficit spending is not expansionary. We are not dealing with a Keynesian style deficit, which stimulates investment and consumer demand, leading to an expansion of production and employment. 

More socialism for the rich

N.Beltov N.Beltov's picture

"The global financial crisis has revealed the need to rethink fundamentally how financial systems are regulated. It has also made clear a systemic failure of the economics profession."

 

Abstract: "The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold. In our view, this lack of understanding is due to a misallocation of research efforts in economics. We trace the deeper roots of this failure to the profession’s insistence on constructing models that, by design, disregard the key elements driving outcomes in real-world markets. The economics profession has failed in communicating the limitations, weaknesses, and even dangers of its preferred models to the public. This state of affairs makes clear the need for a major reorientation of focus in the research economists undertake, as well as for the establishment of an ethical code that would ask economists to understand and communicate the limitations and potential misuses of their models."

 

http://www.debtdeflation.com/blogs/wp-content/uploads/papers/

 Go to Dahlem Report: Economic Crisis, etc. 

NorthReport

Economists forecast drop of 0.8% to 5% and the actual drop is 7.7%

Like the weather person who often just needs to look out the window, some of these economists need to get a grip on what's going on the real world, instead of the the fantasyland that a lot of them live in.

I wonder how many people are considering to permanently stop looking to purchase a home. With this kind of debacle possible,  they may decide to rent for the rest of their lives. Less hassles, no repairs, no mowing the lawn, and much more money to go towards a safe, if there is such a thing, RRSP, for their retirement.  Do homeowners actually realize how much it actually costs them to have their own home? Investment my ass. A lot of these people are being destroyed financially by owning a home.

Pending U.S. Home Resales Slump More Than Forecast (Update1)

http://www.bloomberg.com/apps/news?pid=20601087&sid=aYDO.ah13lRM&refer=home

Economists forecast a 3.5 percent drop in pending sales after an originally reported gain of 6.3 percent in December, according to the median forecast of 32 economists in a Bloomberg News survey. Estimates ranged from declines of 0.8 percent to 5 percent.

NorthReport
josh

The U.S. stock market is down over 55% from its August 2007 high.

KenS

Doug wrote:

Good thing I'm not retiring for at least 30 years. I'll need it. I feel sorry for anyone who has to much sooner. Frown

Not long till I retire. And I'm definitely not insulated from all this.

But all things in perspective: I get to quit going to work and that makes me a happy camper. Period. I'll just figure out how to do it with less- even if its a lot less.

Not the first time.

We live in a rich country. If you are sufficiently resourceful, even a poor person has a lot of slack to work with.

Some [hopefully] comforting words of advice from those looking to the future.

If you weren't planning on qualifying for or needing Old Age Supplement, but find that you will be... there is asubstantial silver lining. The after tax effects of the income you thought you had but do not, it had a huge tax clawback that is not transparent. So you will not need nearly as much as you thought to replace that, and there are resourceful ways to without much difficulty end up with almost the same spending/purchasing power.

thorin_bane

Don't worry they tossed a 30 Billion meesly dollars to AIG AGAIN!!

That company has gotten 180 Billion alone and they still think it will go under. That is tax payers money proping up the rich. wonder what the average america could do with 1000 dollars? As that is the price to keep AIG afloat after their poor management that got paid MILLIONs to fuck everything up.

Doug

They're doing that though because they think it avoids the trillion-dollar problem that would ensue if AIG collapsed. Whether it really avoids it rather than just delaying it, we'll have to see.

George Victor

I wonder if the actuaries are working out their chances?

Doug
N.Beltov N.Beltov's picture

The horrifying health consequences of the current economic and financal crisis are noteworthy. The World Health Organization notes the following:

" As a consequence of the financial crisis in OECD countries, the world risks the most serious economic downturn since the 1930s. The impact of earlier increases in the cost of food and fuel are estimated to have tipped more than 100 million people back into poverty. The challenge facing the world now is to prevent an economic crisis becoming a social
and a health crisis…. A grave human crisis is already happening."

 

Capitalism is death. The sooner it comes to an end the better.  

 

The quote is from " The Financial Crisis and Global Health" by the World Health Organization (WHO).  

NorthReport

This is too much.

Maybe the financial community needs a "Dirty Harry" Wink

How much are we supposed to put up with?

Also the comment section provides a good read. 

Ex-Leaders at Countrywide Start Firm to Buy Bad Loans  

http://www.nytimes.com/2009/03/04/business/04penny.html?_r=1&hp

Fairly or not, Countrywide Financial and its top executives would be on most lists of those who share blame for the nation’s economic crisis. After all, the banking behemoth made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering.

So it may come as a surprise that a dozen former top Countrywide executives now stand to make millions from the home mortgage mess.

Stanford L. Kurland, Countrywide’s former president, and his team have been buying up delinquent home mortgages that the government took over from other failed banks, sometimes for pennies on the dollar. They get a piece of what they can collect.

josh

"The Great Recession of 2008 (and beyond) is hurting men more than women. It is hurting homeowners and investors more than renters or retirees who rely on Social Security checks. It is hurting Latinos more than any other ethnic group. A year ago, a greater share of Latinos held jobs than whites. Today, the two have switched places.

If the Great Recession, as some have called it, has a capital city, it is El Centro, Calif., due east of San Diego, in the desert of California's Inland Valley. El Centro has the highest unemployment rate in the nation, a depression like 22.6 percent.

. . . .

In the long run, this Great Recession may end up afflicting the comfortable more than the afflicted.

. . . .

Yet I still think the Great Recession will eventually end up compressing the rungs on the nation's economic ladder, for the same three fundamental reasons that the Great Depression did. Why?"

http://www.nytimes.com/2009/03/04/business/04leonhardt.html?hp

N.Beltov N.Beltov's picture

While it's useful to go over the mortgage-backed securities (MBS), collateralized debt obligations (CDO), structured investment vehicles (SIV) and all the exotic financial products and instruments that have fueled the bubble since the dot.com collapse in 2000, it's also important to point out, very clearly, that the boom, founded to a large extent on a real estate boom that took the system forward from the last crisis,  that has become a bust is inherently part of the capitalist cycle. A crisis like the current one was inevitable. The question was simply, "When?"

 

All this class warfare by the boss class against working people, whether privatization, deregulation, social cutbacks and other atrocities, or endless warfare and militarization of society, or racing to the brink of planetary ecological disaster, or inter-imperialist rivalry over resources and global political dominance - all of this has led to the accumulation of gigantic profits and surplus that had nowhere to go. So-called effective demand by people that have been impoverished over these years has been eviscerated by the obscene accumulation of wealth at the tippy top. The financialization process over the last, say, 30 years, and the endless creation of ever new capitalist bubbles that pop ending in another bust in the cycle, have led to the current impasse.

It's the system. Sure, there are lots of members of the oligarchy that, shark-like, will swim in the bloody water looking for fresh profits and victims. But when has that been immoral under capitalism?

In other parts of the world, people are making herculean efforts to move forwards, away from the capitalist rush to the precipice. In Venezuela, in Cuba, in Bolivia, an alternative approach to the juggernaut has emerged. These efforts are worthy of careful study from which people who have not been completely infected by market fundamentalism and market idolatry can learn from.

 

But time is running out. A fightback, class warfare in response to the class warfare from the bosses over the last 30 years, defence of Mother Earth, and political organization around an alternative is the way to go. That alternative is socialism. It is either that or more capitalist barbarism.   

thorin_bane

I don't think people have suffered enough. They have turned the corner but still have to travel down the block and make another left before anything will be done. Pulling away ever so slightly will not do much to change things, but that is what they are trying to get away with.

theorangeliberal

Thank god for our strong banking institutions; they have lessened the burden for us for sure.

N.Beltov N.Beltov's picture

Speaking of God, how's that invisible hand doing these days? 

 

Those banks will be even stronger when they're nationalized under democratic control. But which one to nationalize first? Yes, perhaps some real competition could be introduced into Canadian banking for a change. I'm sure the broad shoulders of the generous and civic-minded bankers could manage the burden. Don't forget we'd have to give them substantial raises and bonuses for all that effort. Maybe give them a raise anyway. Know what I'm sayin' ? 

 

M. Spector M. Spector's picture

theorangeliberal wrote:
Thank god for our strong banking institutions; they have lessened the burden for us for sure.

Would these be the same banking institutions that continue to suck hundreds of millions of dollars put of our pockets, even in times of economic distress? Yeah, I guess the burden of carrying around all that cash has definitely been lightened for us by "our" strong banking institutions! 

Fidel

M. Spector wrote:

theorangeliberal wrote:
Thank god for our strong banking institutions; they have lessened the burden for us for sure.

Would these be the same banking institutions that continue to suck hundreds of millions of dollars put of our pockets, even in times of economic distress? Yeah, I guess the burden of carrying around all that cash has definitely been lightened for us by "our" strong banking institutions! 

They are those, the same increasinly deregulated banks which needed bailing out big time during Mulroney's terrible reign after gambling losses on stocks, oil and gas, and the Canary Wharf fiasco in London. They were bailed out big time on order of the shadowy Bank for International Settlements, and Mulroney complied in 1991 with ramming a bill thru parliament which privatised the remainder of money creation in Canada to a level of about 96%.

They would be the same banksters who wanted a green light for mergers in order that they should be big enough to gamble big time with their US counterparts at the same casino tables. But pressure from the NDP and other groups helped put the kibosh to those plans.

And thank goodness CMHC was never privatised as were Freddy Mac and Fanny May, no thanks to the Harpers introducing private US mortgage insurers into Canadian housing market to compete with CMHC on the QT and hush. Sometimes Ottawa heistated with introducing more of the neoliberal voodoo. But they still havent learned. They are still the same two old line parties filled to the brim with rightwing ideologues with somewhere under 35% percent of popular voter support combined and preaching the same failed second-hand rightwing market ideology

theorangeliberal

To M. Spector, your recipe for success is privatizing them? hmm the States are sure doing well with that. just a thought. I mean sure we have some capital vested in them, but think about what kind of a hole a more private alternative would have put us in.

I'm not saying our banking system is the utopian model for the world but hey, were boding PRETTY good compared to some of our other G8 counterparts. 

Fidel

Sure thing. Bush's TARP bailout was more transparent and made public than Harper was with taxpayer funded handouts to Canada's banksters, and US taxpayers are being ripped off for generations to come. 

[url=Canada">http://www.globalresearch.ca/index.php?context=va&aid=12007][...'s 75 Billion Dollar Bank Bailout[/url]

The $64 Billion Federal Budget Deficit is intended to Finance Canada's Chartered Banks

Quote:

No Parliamentary Debate

The $700 billion US bank bailout under the Troubled Assets Relief Program, was the object of debate and legislation in the US Congress.

In contrast, in Canada, the granting of 75 billion dollars to Canada's chartered banks was implemented at the height of an election campaign, without duly informing the Canadian public.

Canada's media and financial press bears a responsibility in this regard. The matter was barely mentioned. It passed virtually unnoticed a few days before a federal election.

Media coverage was minimal. There was no parliamentary debate. No discussion, no debate as one would have expected from the opposition parties at the height of an election campaign as well as in its aftermath.

Nobody seemed to have noticed. Most Canadians do not know that there was a 75 billion dollar bailout of Canada's financial institutions.

And for the record, Brian Masse(NDP) did mention the big bank heist in the House of Commons on December 1st

Quote:

It is interesting, because the Conservatives talk about distancing themselves further when the banks have received over $100 billion of support from provisions of the federal government.

Specifically we have federal government CMHC purchases, pooled together mortgages from the banks, $75 billion for that; a bank account that offers short term credit through PRA to banks, $50 billion-plus for that; the Bank of Canada offers short term credit through PRA to private money markets, $5 billion there; the Bank of Canada established a new term loan facility to assist banks and others, $8 billion there; the Bank of Canada releases treasury bills to investment dealers, $10 billion there. Also the federal government agrees to guarantee loans to private banks and the Bank of Canada accepts asset-backed commercial paper as collateral. What do we get from that? Not a single thing

Another big time bank heist on the backs of Canadian workers. Will these idiots ever learn?

josh
Doug

The value of CitiBank shares went under a dollar yesterday, down from a peak of $57. Includes a slideshow of things that will cost you less than a CitiBank share:

http://www.huffingtonpost.com/2009/03/05/citigroup-stock-sinks-to_n_1721...

josh

The U.S. economy continued to bleed jobs at a rapid rate in February, as employers cut 651,000 jobs from their payrolls, the U.S. Department of Labour reported Friday.

The big job losses pushed the U.S. unemployment rate up to 8.1 per cent - the highest since late 1983 - from 7.6 per cent in January.

Economists had been predicting a total of 648,000 jobs lost last month. February's job losses follow a January employment drop of 598,000.

http://www.cbc.ca/canada/story/2009/03/06/usjobsfebruary.html

 

The payroll drop in January was revised up to 655,000 from 598,000 and December now shows a 681,000 drop, up from the 577,000 previously estimated. The December decline was the biggest since October 1949.

The U.S. economy has now lost almost 4.4 million jobs since the recession began in December 2007, the biggest employment slump of any economic downturn in the postwar period.

http://www.bloomberg.com/apps/news?pid=20601103&sid=aesonW0og4.Y&refer=news

 

George Victor

orangelib:

"I'm not saying our banking system is the utopian model for the world but hey, were boding PRETTY good compared to some of our other G8 counterparts."

---------------------------------------------------------

And my bank, BMO, has just post a profit of $230m in the first quarter. But they informed me, two weeks back, that my line of credit cost was going up a percentage point, even though the central bank's overnight rate to them had been dropped to 1 per cent. And that, of course, flies in the face of the need for them to make it easier for us all to keep on buying. But they have to remain competitive in the market with other insitututions , so that the investor will stay loyal, find some safety in an otherwise scary market.

Oh yes, orangelib, we are all so happy our banks are profitable. But they should be nationalized. Don't forget, it was a conservative (small c) liberal government that stopped them from expanding into unprofitability in the neo-con expansion frenzy of the 90s.

And, jeez, maybe they won't raise my rates with this latest bank rate drop to  0.5 per cent.  We live in hope of their success!Undecided 

M. Spector M. Spector's picture

theorangeliberal wrote:

To M. Spector, your recipe for success is privatizing them? hmm the States are sure doing well with that. just a thought. I mean sure we have some capital vested in them, but think about what kind of a hole a more private alternative would have put us in.

I'm not saying our banking system is the utopian model for the world but hey, were boding PRETTY good compared to some of our other G8 counterparts.

Yes, the Canadian banks have certainly done well for themselves, I'll give you that. At our expense, of course.

So which banks do you have shares in?  

M. Spector M. Spector's picture

Quote:
We are now, it is clear, in no ordinary recession but are headed for a global depression that could last for many years.

[url=Walden">http://mrzine.monthlyreview.org/bello200209.html][u]Wa... Bello[/url] 

M. Spector M. Spector's picture

Quote:
The US economy is swaying, teetering heavily under the increased debt burden imposed by the Iraq War and now the looming banking crisis. President Obama’s proposal to remediate the crisis situation by introducing more debt into the system is now law. The only problem is that, under the present circumstances, President Obama’s therapeutic regimen represents, with a very high probability, the very medicine that will strike a mortal blow to the patient — in this case the US economy.

A steep rise in US housing foreclosures is a crucial element of the present credit crisis. Unfortunately, many of these ‘toxic’ assets are still held by the banks, which are unable to liquidate them from their balance sheets without first going insolvent. No one on the market is willing to buy or sell them, in part as these troubled assets are extremely difficult to price. Even once they are marked down to a selling price, a significant proportion of US banks will still have to enter into bankruptcy proceedings. This represents a painful but necessary step that must occur should the US economy have any hope for recovery. To prevent the death of the patient and to facilitate recovery, it is absolutely necessary, in medical parlance, to first amputate the diseased limbs of the US economic engine.

Unfortunately, the Obama Administration’s plan makes impossible the very outcome that is needed for recovery, and therefore unwittingly enables the disease to spread throughout the entire body. Keeping insolvent banks alive with capital infusions from the government merely postpones the inevitable failure of a large segment of the US banking industry, while damaging the rest of the economy. The Stimulus Package, furthermore, rapidly increase debt spending to overcome a problem whose origin lies in excessive debt spending. If water were previously flooding one-third of the ship, the Stimulus Package makes it inevitable that the rest of the ship will eventually succumb to flooding as well.

[url=Nicholas">http://www.dissidentvoice.org/2009/03/too-big-to-fail-the-inevitable-col... Vakkur[/url]

Ward

What actually happens in an economic collapse anyway?

Doug

Put simply, wages and prices drop until people can justify buying and hiring again or until the government does it for us.

Fidel

And thousands of private banks fold up as per 1929 America, 1985 Chile, 2008 - ? America and neoliberalized economies. National debt soars and unemployment skyrockets.

Howoever, we should not see a real do-over of 1929 in North America with the collapse of "leave it to the market" capitalism then. Governments are much larger today than then and are pumping money into the economy and creating public sector jobs that just didnt exist back then 80 years ago. The "new" liberal capitalism since the 1980s basically said that public sector economy is bad and should either be privatized or made to run according to an efficient business model. As governments pared down public sector economy and deregulated various sectors of our economies -  and basically moving us somewhat closer to the way it was in the 1920's and 30's - the wheels began falling off. And it was as if they'd forgotten that laissez-faire capitalism has never worked anywhere in the world where tried.

M. Spector M. Spector's picture

People lose their jobs, their homes, and their life savings. Crime rates go up. Suicide rates go up. Public health declines. The underground economy grows. A massive assault is launched on the labour movement and its hard-won gains are rolled back. As the ruling class begins to panic, the possibility of fascism increases.

George Victor

A hopeful GV: 

"And, jeez, maybe they won't raise my rates with this latest bank rate drop to  0.5 per cent.  We live in hope of their success!Undecided "

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Looks like it's not to be. A letter-writer in the Globe yesterday was notified "interest rates on lines of credit are to be increased" and got a "paragraph of bafflegab explaining why."

In that newspapers "report on business weekend" section, eureka: "A switch toward more profitable products, such as lines of credit, is helping the core operations churn out strong earnings" for the BMO. It leads the way with  double-digit dividends, and finally, it seems our PM can with confidence say that there are prime pickings in the market - the banks' shares are nearly 50 per cent lower than they were Aug. 1, 2007.

Mind you, Jim Flaherty's new-found Keynesian faith might founder when he sees the results of concerns among bankers...that letter writer continued:

"I was shocked, shocked - Claude Rains himself couln't have put it any better. Needless to say, it will be a very long time before this family responds to governments and experts urging us to help the economy spend its way out of the recession by spending our way into debt."

 

And unless Jimmy nationalizes the banksLaughing, that's got to be my response as well.

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