World Bank's crisis warning

Hi Aaron,

Not suggesting that all banks should be nationalised but they seem to want the debts to be nationalised and the profits to go to the managers and shareholders.

We need a balance, if they need Govt money to survive then they are insolvent, they must be recapitalised, lets do it to avoid chaos but the populace must be rewarded for taking on the risk and the bankers punished for being greedy, profilgate a** holes

but it's by default.

for examples, FNM and FMC were natioanlised by the US Fed and were buying all the toxic assets from the other banks.

that means that the govt now control the debt over that security, and considering a lot of folk went bankrupt and/or handed back their keys, the govt now owns the underlying land.

you can call it what you want - a side effect, a conspiracy - whatever, but that's the facts of the matter.
 
If GFC the second strikes, for christ sake, get Kevin Rudd back in the high seat!

He knows how to stimulate the ecomomy. Yeah, Id love another pay out - forget the surplus, its history. And no, dont let P Garrett control ANY stimulus portfolio, unless they invent a method of reflecting energy from a bald's man head.
 
but it's by default.

for examples, FNM and FMC were natioanlised by the US Fed and were buying all the toxic assets from the other banks.

that means that the govt now control the debt over that security, and considering a lot of folk went bankrupt and/or handed back their keys, the govt now owns the underlying land.

you can call it what you want - a side effect, a conspiracy - whatever, but that's the facts of the matter.

Yes that's true, but it was at govt urging that the NINJA loans got started, all that was created by Greenspan keeping rates too low to help the DOW raiders.

In a way I am not so teed off with that, my main beef is with the merchant bankers who gear way beyond sensible business practise, pocket their wages then ask the tax payers to bail out there crippled bank.

If they have stu**ed up then they should wear the consequences to their reputation and pocket.

Did you read the article about why Bear Sterns was let die ? They were the only bank to refuse to contribute to the LTCM situation when they went belly up apparently. Nothing official of course but a remarkable coincidence:cool:
 
In regards to the World Bank crisis warning: did they give a prediction in 2007 that risk is increasing?????
No!!!
They 'forecast' that essentially that good times lay ahead.

Right now it doesnt take a brain child to realise that difficult times are ahead, but will that result in a 'crisis'?????
Given their previous prediction skills, i would take any world bank commentary with a grain of salt.

If they were so bad with their previous predictionary powers, what makes them any better now????? Every financial donkey can tell me that difficult times are ahead, i dont need the world bank to tell me this.

Further more we dont know how this environment will play out in regards to investment returns.

With a 'difficult environment' being so obvious, this 'difficulty' is being played out in the pricing of assets.

So what will the future return of those assets be?

I cant give you the answer, but i am not looking to the world bank to give me that answer either. By the time they figure it out, it will be years after the event.
 
To be fair, only about a dozen economists predicted the GFC, including forum favourite Steve Keen. (OK, Shadow disagrees on that one. :))

Reinhart and Rogoff make the point in This Time is Different (link to PDF summary) that sovereign crises tend to follow banking crises, and also commodity booms. So the Eurozone is right on cue for that.
 
In a way I am not so teed off with that, my main beef is with the merchant bankers who gear way beyond sensible business practise, pocket their wages then ask the tax payers to bail out there crippled bank.

If they have stu**ed up then they should wear the consequences to their reputation and pocket.

I think you've identified the problem....you have PAYG workers, with no accountability or risk taking ability, running businesses. How can that NOT lead to disaster?
 
I think you've identified the problem....you have PAYG workers, with no accountability or risk taking ability, running businesses. How can that NOT lead to disaster?

it was part of the times. Easy to blame the 'bankers' yet for most of US, we all participated.

Yes thats right, most of us participated, even a good proportion of the regular members on this forum.

Go back several years pre GFC and review the posts on this forum:
(a) the popularity of 'living off equity' not cash flow. There were rampant debates on this issue.
(b) the popularity of margin loans on shares
(c) the high level of gearing for residential property, in more recent times its come back, but pre gfc, anyone who wasnt taking advantage of those 95%+ LVR ratios' was regarded as a bit of a dimwit. Now 95% LVR is 1:20 gearing, at the height the 'investment banks' were doing 1:30 odd, not a huge difference, just on a much larger scale.
(d) the use of derivative instruments and 'insurance': well where do covered bonds come from and mortgage insurance (in its simplified form, of course wall street takes this to the next level in complexity) In 'wall street terms' this becomes credit default swaps etc
(e) one of my FAVOURITES, property doubles every 10 years. Well this thinking was also proliferant in many of the models used in wall street (not the doubling every 10 years, but extracting long term previous trends and matching them again recent volatility levels, ie property might well double every 10 years over the long long term, but if price volatility hits, this sought of long term 'fact' is not going to provide much comfort with high debt levels)

etc etc
 
it was part of the times. Easy to blame the 'bankers' yet for most of US, we all participated.

Yes thats right, most of us participated, even a good proportion of the regular members on this forum.

Go back several years pre GFC and review the posts on this forum:
(a) the popularity of 'living off equity' not cash flow. There were rampant debates on this issue.
(b) the popularity of margin loans on shares
(c) the high level of gearing for residential property, in more recent times its come back, but pre gfc, anyone who wasnt taking advantage of those 95%+ LVR ratios' was regarded as a bit of a dimwit. Now 95% LVR is 1:20 gearing, at the height the 'investment banks' were doing 1:30 odd, not a huge difference, just on a much larger scale.
(d) the use of derivative instruments and 'insurance': well where do covered bonds come from and mortgage insurance (in its simplified form, of course wall street takes this to the next level in complexity) In 'wall street terms' this becomes credit default swaps etc
(e) one of my FAVOURITES, property doubles every 10 years. Well this thinking was also proliferant in many of the models used in wall street (not the doubling every 10 years, but extracting long term previous trends and matching them again recent volatility levels, ie property might well double every 10 years over the long long term, but if price volatility hits, this sought of long term 'fact' is not going to provide much comfort with high debt levels)

etc etc

Bit of a chicken/egg situation really, none of those methods would have been available if the money from USA wasn't so cheap.

It was very much a case of banks pushing credit into society then people accepting the offer. Once people became aware of the fact so much cheap money was available then all of the fancy geared schemes were created to take advantage of the money.

If people go to a bank and ask for an IP lend of 70% and are offered 105% naturally they are going say yes thanks, now I will go and find another one and do it again :)
 
it was part of the times. Easy to blame the 'bankers' yet for most of US, we all participated.

I strongly agree.

I've heard claims that equity withdrawal added 1% (or more) onto GDP growth during the boom over the last decade in the US and UK. I've not seen any Australian figures, but would guess it's the same. So even those of us who weren't riding the property bubble benefited.

Macca's right in that the banks pushed borrowing (Equity, mate), and didn't really think about the downsides.

If we are in a period of deleveraging, then we're likely to see a cut in GDP that's going into paying down debt.
 
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