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2008-02-10 Home Front Economy

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Posted by Anonymoose 2008-02-10 20:14|| || Front Page|| [6 views ] Top

#1 "why wait for real figures, when you can panic now?"

/senior global policymakers. When did they create that position? Why wasn't I notified??

Posted by Frank G">Frank G 2008-02-10 20:35|| 2008-02-10 20:35|| Front Page Top

#2 > Japan and European countries had rejected the idea, floated by Dominique Strauss-Kahn, International Monetary Fund head, for joint efforts to stimulate their economies by fiscal packages.

It's a dumb idea. Send yourself a cheque and see how much richer you feel.

Posted by Birght Pebbles 2008-02-10 20:49|| 2008-02-10 20:49|| Front Page Top

#3 I've worked for a number of banks and banking is basically about managing risk. Risk being the probability a loan won't be repaid.

The main way banks manage risk is to limit the amount loaned to some percentage the asset used to secure the loan. Generally this is 50% or less of the current value of the asset, eg shares.

Only with real estate is the percentage much higher and the amount loaned close to 100% of the current value of the asset.

As long as real estate kept going up in price which it has done every year since 1945 in most countries, everything is fine. When real estate starts a marked decline then all real estate secured lending becomes at risk (because of contagion - selling results in lower prices which results in more selling).

How much money are we talking about? At a rough calculation - 30 trillion dollars - several times the market cap of all the banks in the world and roughly the same as all the government debt in the world.

A few billion here, a few billion there, pretty soon we are talking real money.

Another example of how markets and capitalism are bad at handling large risks.

Posted by phil_b 2008-02-10 22:16|| 2008-02-10 22:16|| Front Page Top

#4 Just how would you handle it phil_b?

Posted by Sock Puppet of Doom 2008-02-10 22:57|| 2008-02-10 22:57|| Front Page Top

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