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2008-12-13 Europe

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Posted by lotp 2008-12-13 00:00|| || Front Page|| [1 views ] Top

#1 German banks' problems are identical to the US:

Banks have on their books derivatives which were created to ensure value while prices were rising but which also made them worthless if prices declined.

No bailout is going to work unless and until banks have a "Come to Jesus" moment about the value of those holdings. Banks are deliberately holding the economy hostage by holding these toxic securities while refusing to properly book their actual value.

TARP will fail, miserably, by next March. The only economic program that is currently hard at work are the equities markets' drive to price in a deflationary environment and price in the coming Obaman socialist government in the US.

Posted by badanov 2008-12-13 00:51|| http://www.freefirezone.org]">[http://www.freefirezone.org] 2008-12-13 00:51|| Front Page Top

#2 This is in part politics. Brown via FT answering to German Finance Minister that rightly called Brown plan "crass".

Posted by Uleck Ghibelline9225 2008-12-13 01:27|| 2008-12-13 01:27|| Front Page Top

#3 The MP is doing a bit of grandstanding.

The Libor hasn't done anything scary in months. 30 year home loans are down over the last month. The lack of investment in long term projects isn't because there's no money to be had. Its because the money isn't sure it will be paid back.

Posted by Mike N. 2008-12-13 03:30|| 2008-12-13 03:30|| Front Page Top

#4 German banks' problems are worse than US. They were much more highly leveraged.

Posted by Nimble Spemble 2008-12-13 08:13|| 2008-12-13 08:13|| Front Page Top

#5 Not just more highly leveraged. They also have long owned significant shares in the companies they deal with, and their operations are by law a lot less transparent, which has allowed all sorts of rot to grow over the decades.

Posted by trailing wife">trailing wife 2008-12-13 09:14|| 2008-12-13 09:14|| Front Page Top

#6 Socialist schemes come to a crashing halt when the US T-bill bubble collapses. I saw a nose bleeding, anguished report from an economist, decrying the utter madness of the following:

1) Bubble demand for T-bills is reaching a frenzy, so much that once bond issues are purchased, they are being "scalped" to others who missed out. Demand is 4 to 1 over issue.

2) The FED wants in on the action, by issuing its *own* bonds at zero yield. This is weird beyond weird, almost defying analogy. It may not even be legal, but at this point, I don't think that matters.

3) When the T-bill bubble bursts, economists quoted by Bloomberg have said it will be "spectacular". Another said it will be like watching Mount St Helens erupt, and knowing that no matter how fast you run, or could even drive away, you're done. So you might as well enjoy the show.

Posted by Anonymoose 2008-12-13 09:14|| 2008-12-13 09:14|| Front Page Top

#7
German banks not only are highly leveraged, opaque and self-dealing. Many of them also skirted EU banking regulations by purchasing risk offsets from AIG which were possibly illegal and definitely a breach of banking oversight.

If AIG had failed, not only our banking system but a number of Western European and Asian ones would have toppled due to the fact that they offloaded risk onto AIG. All of them crashing more or less together would thrust us into a major international depression. Still might.

Posted by lotp 2008-12-13 09:17|| 2008-12-13 09:17|| Front Page Top

#8 They also have long owned significant shares in the companies they deal with

That's the broken Japanese model that Asian banks (at least outside China) abandoned a decade ago.

It creates a double hit to a bank's capital if a client company goes bust - Bad unrecoverable loans and worthless shares the bank owns as part of its capital base.

And offloading risk to a 3rd party is what caused the financial crisis. It should be made illegal for banks to do this except with other banks. When non-banks do this, it's legalized gambling. Including when insurance companies do it.

It's curious that the biggest culprits in this whole mess, insurance companies, get hardly any of the blame.

Posted by phil_b 2008-12-13 10:29|| 2008-12-13 10:29|| Front Page Top

#9 Thanks for the advice 'Moose, got my handlotion right here.

Posted by .5MT 2008-12-13 19:01|| www.cybernations.net]">[www.cybernations.net] 2008-12-13 19:01|| Front Page Top

#10 right...like you don't already keep it handy whilst surfing the intartubes

Posted by Frank G">Frank G 2008-12-13 19:43|| 2008-12-13 19:43|| Front Page Top

#11 Jomson & Jomson only stock I ain't ditched.

Posted by .5MT 2008-12-13 19:46|| www.cybernations.net]">[www.cybernations.net] 2008-12-13 19:46|| Front Page Top

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