The banks start tightening the screws as global panic occurs
For over a year now I have been following on the internet the financial tragedy involving the misuse of property packaged derrivatives called CDO's with growing concern. The internet is a terrific resource which allows you to cut through the spin that our political and financial masters serve up.
We have heard a lot of nonsense by our political leaders about how this world wide contagion will not undermine our markets........ Think again
The Australian banking system no matter how well managed is part of the world wide integrated banking conglomeration. As the banks are being forced to digest a write down of assets they are also being squeezed as corporations take up undrawn lending commitiments as their balance sheets have also been hit because of interparty liabilities.
As the demand for capital increases and the collapse of the securitisation markets both here and overseas, small to medium size businesses will be the first to discover that they cannot access previous sources.
As lending markets contract so to will housing, retail, commercial and industrial real estate. Banks depend on consumers and business to borrow. This will result on a cascade of losses hitting banks and insurance companies
This will then set up a cycle of further credit defaults, a further diminuation in banking capital with tightening of lending requirements resulting in a drop in economic activity that the will start the cycle over with further credit defaults.
You will continue to hear that this is a normal common garden recession and everything will be ok this time next year. The reality is the last great depression took over 20 years to work itself out and for the share market to regain its loses. All assets collapsed during that time including property.
Unlike the last great depression we are in a soft depression with a world wide economy that has much deeper pockets. The fiscal damage never the less is serious and you are seeing the gradual decline in Pax America's financial dominance.
Many Somersoft posters are still in denial as to the seriousness of what has occurred. This is because many have never studied any history and are doomed to repeat it. Fortunately the head of the US reserve (which is a private banking consortium) did his Phd on the underlying causes that brought the world down in 1929.
Problem is the politicians are unwilling to allow the perpetuators to fall that would shorten the pain and allow the second tier financial structures on wall street to step in thereby reestablishing good banking practices.
Property is an asset like paper equities and it is only worth what the market is willing to pay. If there is no capital than there is no market for property to sell in. Unlike paper equities property does have some redeeming value... you can always plant veggies
