Financial Armageddon!!

[Davo36]

Actually I was lying. I drink DB Draught! It's a sweeter beer which I like more.

I have low brow tastes. Don't need no fancy stuff me. Give me a six pack or a bottle of cheap bubbly stuff and I'm happy. Hamburger and chips for tea is what I want, not fine dining in some poncy restaurant where you have to be on your best behaviour.

[Bob Kane]

Does anyone mind if I back the truck up and return to a financial topic?
There seems to be a common thought that we are heading into high inflation (or even hyper-inflation) territory in a few years time.
Can anyone explain the reasoning for this or is it just 'Pessimism Porn'?
No-one can pick what the financial world will be like in two years time - so how come some people can be so certain of high inflation?
I understand a lot of money is currently being created. This may - or may not - result on inflation.
The more I think about it, the less credible I think the hyper-inflation camp is.
We know how to control inflation these days.

[Dean@Massiveaction]

We know how to control inflation these days.

So as almost every nation on the planet prints money like there's no tomorrow how will they counter high inflation?

[Bob Kane]

Simply raise the OCR until a recession happens.
NZ did this a short time ago.

[Austrokiwi]

I understand the risks of inflation and the theory behind it..............the only thing I haven't seen any comment about is how much money is being destroyed............I have seen huge quotes on bad debts from banks...........All I know is Inflation will only increase if the amount of money printing exceeds the amount of money being destroyed through bad debt!

[outspoken]

All I know is Inflation will only increase if the amount of money printing exceeds the amount of money being destroyed through bad debt!

That's right, and it is also about the velocity of the newly created money, if, as you say, it is used to eliminate bad loans & debt, the banks hold onto it to restore their balance sheets. Inflation is then a stealth tax as the currency devalues, everything becomes more expensive yet the ways to put more Income in your pocket is production or debt. Most Govt's are opting for the latter, compounding the problem!

Inflation & deflation can happen at the same time, see here

http://www.propertytalk.com/forum/showthread.php?t=20525&highlight=inflation+myths

[Dean@Massiveaction]

Not to mention the fact that someone has to pay the interest including the government.
Interest rate controls won't work either.
As I read somewhere yesterday....

Since 1716, central banks have been trying to fly the economy with a series of central controls. In all this time, they have always been seeking a soft takeoff and landing. Despite this, they crash and burn every time. Six months ago, we installed a new doohickey in the cockpit. We haven't tested it yet, but you're all along for the ride whether you like it or not. Why are you worried?

[Badger]

Simply raise the OCR until a recession happens.
NZ did this a short time ago.

Where already in recession with low interest rates and the lower rates go the more problems that will emerge as *real capital* is being consumed and destroyed...

Why is a negative marginal productivity of debt a sign of an imminent economic catastrophe? Because it indicates that any further increase in indebtedness would inevitably cause further economic contraction. Capital is gone; production is no longer supported by the prerequisite quantity and quality of tools and equipment. The economy is literally devouring itself through debt. The earlier message, that unbridled breeding of debt through the serial cutting of the rate of interest to zero was destroying society’s capital, has been ignored. The budding financial crisis was explained away through ad hoc reasoning, such as blaming it on loose credit standards, subprime mortgages, and the like. Nothing was done to stop the real cause of the disaster, the fast-breeder of debt. On the contrary, debt-breeding was further accelerated through bailouts and stimulus packages.

The Revisionist Theory and History of Depressions, see:
www.professorfekete.com
A Fekete

Far different than the fantasy on TV from finance talking heads, bank economists and politicians about spending your way to profitability with low interest rates...

[muppet]

Fed Is Said to Seek Capital for at Least Six Banks (Update1)



By Robert Schmidt and Rebecca Christie


April 29 (Bloomberg) -- At least six of the 19 largest U.S. banks require additional capital, according to preliminary results of government stress tests, people briefed on the matter said.
While some of the lenders may need extra cash injections from the government, most of the capital is likely to come from converting preferred shares to common equity, the people said. The Federal Reserve is now hearing appeals from banks, including Citigroup Inc. and Bank of America Corp., that regulators have determined need more of a cushion against losses, they added.
By pushing conversions, rather than federal assistance, the government would allow banks to shore themselves up without the political taint that has soured both Wall Street and Congress on the bailouts. The risk is that, along with diluting existing shareholders, the government action won’t seem strong enough.



Read more at:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aiz06xRmmeOQ&refer=home

[Badger]

Those banks are walking dead zombies! They have no equity. If you run a business as those banks have you are out of business! As a factoid their CEO's should be in a court of law for fraud and not recieving more tax payer money!

[tpr2]

Are you sure Badger?
Who would run them if they went to jail?

[Gatekeeper]

Are you sure Badger?
Who would run them if they went to jail?

Huh????
Someone who does a good honest job maybe?

[tpr2]

Sorry Gatekeeper.

I was teasing badger. I forgot to put the wink beside it to show I was being facetious.

[muppet]

Three Banks Seized by Regulators, Pushing Year’s Total to 32



By Margaret Chadbourn and Ari Levy
May 2 (Bloomberg) -- Regulators seized banks in Georgia, New Jersey and Utah yesterday, boosting the tally of failed lenders in the U.S. this year to 32 and tapping more than $1.4 billion from the federal government’s deposit-insurance fund.
Silverton Bank of Atlanta, a commercial bank, was shut by the Office of the Comptroller of the Currency. Citizens Community Bank of Ridgewood, New Jersey, and America West Bank of Layton, Utah, were seized by state regulators. The Federal Deposit Insurance Corp. was named receiver for all three. Silverton was the largest failure since Downey Financial Corp. was shut in November, costing the FDIC about $1.37 billion.
The FDIC’s deposit-insurance fund, supported by fees on insured banks, fell 45 percent to $18.9 billion in the fourth quarter after 25 banks closed in 2008 amid the worst financial crisis since the Great Depression. The U.S. economy contracted at a 6.1 percent annual rate from January through March, the weakest performance since 1957-1958.
Silverton Bank, which didn’t take consumer deposits, provided services to about 1,400 banks in 44 states, the FDIC said yesterday in a statement. The Washington-based regulator set up a bridge bank to take over the operations of Silverton, which had about $4.1 billion in assets and $3.3 billion in deposits. Taking over the bank will cost the insurance fund about $1.3 billion, the FDIC said.
“Silverton had significant loan losses which had eroded its capital position,” Pamela Farwig, an associate director in the FDIC’s division of resolution and receivership, said on a conference call yesterday. “They had a large volume of problem assets centered in acquisition development and construction loans.”
Citizens Community
Citizens Community Bank had assets of $45.1 million and deposits of $43.7 million, the FDIC said in a statement. North Jersey Community Bank paid a premium of 0.67 percent to acquire all of the deposits. North Jersey will take over Citizens Community’s single banking office and plans to open it May 4.
America West’s three branches were assumed by Cache Valley Bank of Logan, Utah, which also bought the failed bank’s $284.1 million in deposits at a discount of $352,000. Of America West’s $299.4 million in assets, Cache Bank purchased about $10.9 million, with a 30-day option to buy loans at book value, the FDIC said.
The FDIC is forcing the banking industry to pay a one-time, emergency fee to prop up the insurance fund. FDIC Chairman Sheila Bair said she may trim the assessment if Congress increases the agency’s authority to borrow from the U.S. Treasury.
FDIC’s Borrowing
Senate Banking Chairman Christopher Dodd, a Connecticut Democrat, introduced a bill this week that would raise the borrowing authority to $100 billion and temporarily increase it to $500 billion through 2010. The House of Representatives already passed a measure that would more than triple the FDIC’s credit line from $30 billion and permanently raise the deposit- insurance limit to $250,000 per depositor per bank, from $100,000.
FDIC-insured banks lost $32.1 billion from October through December, the first aggregate quarterly loss since 1990. The agency insures deposits at 8,305 institutions with $13.9 trillion in assets.

[Commercial Dan]

The US is stuffed as I have said all along, bankruptcy awaits.

I think we will be struggling here too but not to the extent of that in the US and the UK.

Still good to accumulate property!