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Tuesday, February 26, 2008

Going down

Another grizzly, this time Captain Hook:

You should know that when banks begin to fail in the States, and they will, things could spiral out of control to the extent controls will to need be placed on both digital and physical movement. Transfers between banks will cease up completely, debts will be called in (so pay them off now), systems from food distribution to medical care will break down, and Martial Law will be the result as the population retaliates. Life will change as you know it.

[...] Japan has never really escaped the credit crunch that gripped their economy back in the 90's after bubblizing the real estate market. That's the tell-tale-sign a bubble economy is on its last legs you know - when master planners need resort to bubblizing the real estate market. Generally it's all down hill after that on a secular (long-term) basis because this is a reflection of not just a turn in the larger credit cycle; but more, and the driver of credit growth in the end, this is the signal demographic constraints have turned negative. [...] It's a simple numbers game, where an aging population is less prone to take on debt.

He considers the possibility of a Japanese-style asset deflation, which gels with my earlier thoughts regarding a generation-long UK property slump.


Jim in San Marcos said...

Hi Sack

I think that the banks are in pretty good shape here. What's not really understood very well are the SIV's that they sell.(Security Investment Vehicles). These things are not insured. If you bought one, kiss it goodbye. The bank didn't lose a dime, the investor did. The bank is just selling tickets to the event.

There are two banks that could be in serious trouble, Citi Group and B of A. I think that the Fed can clean them up without too much collateral damage.

I think most of the damage has been done in Mutual Funds and Investment Retirement Accounts. These investments do not fall under any federal rescue plan. If its gone, that's just too bad. The trouble is, so far, no one has lost a dime on these investments. Thats just a little too hard for me to believe.

Sackerson said...

Hope you're right, but Michael Panzner is quoting this:

"Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia," said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.

... from the WSJ here: