Monday, November 12, 2007

Credit Crunch

In case you haven't noticed, the credit crunch that was supposed to be not a problem, is rapidly turning into a problem that just might not get solved.
The difficulty is no-one has the first clue as to a) how much is involved b) who is actually holding the toxic waste and c) er, should we write it down 25% or 55% or er.....
I'm also pretty certain that those who are holding it don't even know how much of a problem they have got. My bet is that over the next few years we will see a leaching-out of the odd billion here, the odd billion there, just as we did with the sovereign debt crisis, the secondary banking crisis, the LTCM crisis, etc etc. Banks always get it wrong. That's what they are there for. And the central banks will keep their eyes averted until it starts to pick up again.
There's one little titbit of information that might interest you.
Ordinary businesses that either make or do things can't afford beautiful new " statement" offices and buildings. Only Banks, Insurance Companies and food retailers can.
It's how they waste money whilst they are getting up a head of steam to blow another $100 billion or so.
To be fair, the food retailers are rather better at not blowing it.
Mervyn may be holding out and so may the ECB - but you can bet, given the excuse, the Fed is delighted.
Remember the twin deficits of the US current account and the Federal Budget? Well, in case you haven't noticed, the first is down 20% this year already. America is effectively exporting it's problems to the rest of us - and forget about China taking up the slack. The key to American wealth is it's flexibility and the love affair that the world has with being in America. China within the next 20 years will stop growing. And who wants to migrate there?
So the printing presses aren't stopping just yet.
Just remember, the danger to your lifestyle is not being poor.
It's not being able to borrow.

2 comments:

Winchester whisperer said...

Neither a borrower nor a lender be...

kinglear said...

... was said by someone who knew not the joys of compound interest OR leverage.