Posted on 07/15/2008 7:39:29 PM PDT by DeaconBenjamin
Merrill Lynch has warned that the United States could face a foreign "financing crisis" within months as the full consequences of the Fannie Mae and Freddie Mac mortgage debacle spread through the world.
The country depends on Asian, Russian and Middle Eastern investors to fund much of its $700bn (£350bn) current account deficit, leaving it far more vulnerable to a collapse of confidence than Japan in the early 1990s after the Nikkei bubble burst. Britain and other Anglo-Saxon deficit states could face a similar retreat by foreign investors.
"Japan was able to cut its interest rates to zero," said Alex Patelis, Merrill's head of international economics.
"It would be very difficult for the US to do this. Foreigners will not be willing to supply the capital. Nobody knows where the limit lies."
(Excerpt) Read more at telegraph.co.uk ...
Heck, I know nothing about finance. Lots about Russian culture. Sorry.
That’s Ok, A Russian understanding will help as well.
Isn't it curious that the US can give dollars to just about every country in the world and at the same time they can complain about their investments in the US?
I have followed their Eurasian movement for a long time. Putin was heavily into it. It was obvious by his politics what motivated him. If you read Dugyn, everything Putin did made perfect sense.
Many of their websites post the desire to see us destroyed, period.
I guess we see things differently. To me, 6 brokers calling daily shows a level of desperation on their part due to a severe slowing of the real estate market.
But let me back up... When you say “I just don’t see it as that bad”, you make my point that people don’t have the time or don’t have the desire to understand how severe this financial crisis is.
You have to look beyond today and ask if think will be better in the near future. Back in 2005, a hell of a lot of people looked at ever-appreciating houses and thought it would happen forever. They took a present trend and assumed or convinced themselves it would continue and the trend would not change.
I don’t know where you live and I’m sure you think you got a bargain on your new home, but it remains to be seen if it is not a bad time to invest. If housing looses 30% due to this extreme liquidity crisis that twice now — with Bear Stearns and again with Fannie and Freddie — have threatened to destabilize the entire financial markets and ripple through the economy. Bernanke said as much about Bear. He didn’t need to say it about Fannie and Freedie and the lions share of home mortgages they hold.
So, you are looking at trends today and you have come to the reasoned conclusion that it is a good time to invest. I am trying to be as informed about the impending insolvencies throughout the financial sector in the USA and abroad (Bear, Fannie, and Freddie are just the tip of the iceberg), and I am deeply concerned that the bottom in house prices, and in stocks, and the potential destruction to GDP is simply horrendous.
I’ll be so very happy to eat crow and say how wrong I was and nothing happened but a very mild recession. But I don’t believe that after all I’ve read.
And since I am such a gloomy guy, try reading this with half an open mind and tell me what you think about the future state of our economy.
http://www.eurotrib.com/?op=displaystory;sid=2008/7/15/164823/245
So apparently nothing has changed since Khrushev(sp). I noticed Putin was going forward with his continentel shelf crap at the North Pole.
I posted this for another, but heck, it is good enough for you to read as well. Heck, it is good enough for a post. I think I will post it to its own thread.
It is positively a worst-case scenario, and I’m sure it will generate a lot of slander my way as doom-and-gloom Freeper. Slings and arrows and all that rot... Roubini is no guarantee, but his credibility and track record predicting the unfolding housing bubble is far, far above our political hacks who called it contained, bottomed, mild, etc..., including BurnYankee and Paulson, who I hear got both barrels from Bunning today.
http://www.eurotrib.com/?op=displaystory;sid=2008/7/15/164823/245
I will read it but first I want to say that local government will eat crow on property taxes. I dislike government. If their ability to borrow drops and their bond ratings fall thats fine with me.
We here in the US had better get our house in order right quick. Obama is an idiot. McCain less so. Trouble is, I don't see any leaders on the horizon.
Indeed, if they destroyed our economy, what or who would they then sell to?
Since mid-90's, shortly after Greenspan's "Irrational Exuberance" speech, I suddenly realized that I am witnessing something I have only read in history books. A society at its peak, head and shoulder above others, starts to ruin itself due to its hubris. There are any examples in history, but I had never seen it myself. It was the eye-opener. Such a momentous event unfolding before my eyes. Furthermore, each time I thought it has run its course, it picks up again and go on again, lasting far longer than I expected. It was bewildering at first, and frightening as time passes by. Now the problem grew astronomical in size. Mind-boggling. I have been actually living in interesting time.
My family and I spent Christmas with an in-the-know Big European Banker and his family.
like in 1973 and 1979 we are facing a stagflationary shock to oil, energy and other commodity prices that by itself may tip many oil importing countries into a sharp slowdown or an outright recession
That's worth intrepreting, I invest in commodities so whats the beef.
I agree with you. We get predictions, but no training on how to behave if we believe those predictions.
Some things are obvious. It is not time to buy a bigger home. It is not time to buy a vacation home. Investors are buying rentals because prices have dropped from peak, but without knowing how much further they will fall, which could be quite a bit below the historic mean due to the liquidity crisis. It is not time to buy a rental.
It is not time to make a big purchase on a luxury car or take that lifetime dream vacation if it is going to cost a lot.
It is time to be in cash-related investments and to reduce your spending and take a wait-and-see attitude. If it turns out to be a short, mild recession, you will have conserved plenty of your cash for toys and games. But if the economy really tanks and if you lose your job, you just may have liquid money available to ride out a year or two of hardship. Because if that happens, to be sure, houses and luxury cars will be cheap and plentiful coming out the other side of it.
Please attribute some of that to your age and knowledge as time goes by. 1976 wasn’t much different.
We've been down this road before, no? Discussing ferners dumping bonds?
Bond dumping means there must be a buyer. If things are so bad a ferner needs to dump, even for geo-political reasons, someone is going to want a big discount. This would mean a high interest yield to maturity. If enough bonds were sold, world wide interest rates would be affected. The issuing country's new issues would have to reflect that rate.
Let's say the world financial situation deteriorates to the above hypothesis, the ChiComs and the RooskieComs try to ruin U.S.A. economy, whose side would you want to be on?
Worst case future scenario would see Uncle Sam offering higher yields and ferners putting their eggs in EUrotopia or other socialist countries' basket. In a time of financial crisis, I wouldn't take that bet.
yitbos
That is exactly what I’m doing. Saving like crazy. Almost everything is in cash right now. I think my job is safe. Hopefully I can ride this out with minimal damage. The thing is in a few years I can take early retirement. My company offers both a pension plan and a 401K. It will depend on the inflation rate. If inflation is going nuts (above 8% with no end in sight) I will have continue to work and pray that there will be no mergers that would threaten both the job and retirement.
Look at the reversal of rates. That is a major clue.
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