Friday, September 14, 2007

the grab bag # 9 - the trigger

Did y'all hear what David Dodge has been saying in London, England (the same day there is a bank run there)?

ECB cash infusions may not succeed: Dodge
September 14, 2007 at 7:06 AM EDT

ZURICH — The European Central Bank's efforts to restore confidence to credit markets by pumping in liquidity are unlikely to succeed, Bank of Canada Governor David Dodge was quoted as saying on Friday.

“I'm not sure practically, whether it would do anything,”

Interest rates have risen well above overnight money market rates as banks have hoarded cash as a precaution in case they are forced to bail out off-balance-sheet debt vehicles they helped to set up during an era of abundant cheap money.

“If I thought that somehow there was a magic wand and if we did that for three or four days, then all of a sudden the markets would clear and life would be beautiful ... There is no principle that says (this) is a bad thing to do, but I can't believe it will do the job,”.

Mr. Dodge also said it was not the duty of central bankers to “bail out people who have made losses.”



Dodge says he should have driven rates up 'harder'
Reuters, Globe and Mail Staff
September 14, 2007 at 5:26 PM EDT

Bank of Canada Governor David Dodge says he should have driven up interest rates “harder” before the current global credit squeeze to tighten borrowing conditions, according to an interview published in The Economist magazine.

In a mea culpa to financial markets, he said the central bank may have played a role in fomenting excesses in credit markets prior to the disruption stemming from rising defaults on payments by U.S. subprime mortgage holders.


I never thought that those cash infusions would work, but merely give the big players the chance to get their money out. The shite hits the fan, there is a big bally-hoo, the CBs use a whole bunch of our money to drag things up, the big money pulls out, and the greedy sucker class rushes back in to get slaughtered again. Or something like that. I have also been hoping for significantly higher interest rates for the last 3 years - to slow this train down. I am fairly ignorant of economic intricacies and ephemera, but if I have seen this coming (and many of you have too), how come it took all these "experts" so long to see it? Wilful ignorance?

Things have reached an excess in every aspect of Western civilization and exploitation, and there is a cleanse coming. Recession talk in the MSM, etc. means depression. Things are much worse than is let on. We are living in interesting times, and as I have admonished before, gird your loins.

I can't believe that people are still buying real estate at this point. It is going to crash, and crash very hard - along with everything else. These banking/loan shenanigans are the trigger - the "outside event" that so many of the RE boosters have been saying we would need to turn the RE market. You know - the one that will never happen.

I have a little theory on what is really causing all of this madness. It is very "out there", but I will present it in the coming days.


patriotz said...

If you own a house worth 300K, and you owe 400K on it, can someone help you out by loaning you another 100K? Of course not.

That's the problem. The bank's trash assets don't cover their liabilities. You can't borrow your way out of that.

A lot of bagholders are going to take it in the shorts.

Anonymous said...

We were going to buy one of the rental pool properties in the Okhanagan because we have a large family and need a place to go and can't afford a $700,000 vacation home. We did not think we would make any money on it - just a place to go with the kids.

We are going to sit tight. I think it would be a huge mistake right now to buy something like that.

casual observer said...
This comment has been removed by the author.
casual observer said...

When a heavily indebted economy starts to falter under the burden of excessive debt, the central bankers' answer is to lower interest rates in hopes that people will take on even more debt.

This does nothing to rid the economy of the excesses that helped inflate the bubble in the first place. It only postpones the inevitable, much deeper downturn.

An economy does not become more prosperous over the long term, by continually increasing the indebtedness of its participants. I don't know what the current debt to growth ratio is right now, but a couple of years ago it took over $4.50 of new debt being added to the economy, in order to produce an extra $1 of growth in GDP.

An analogy of our economy is like that of a rider on a horse (the economy) being chased by bandits (debt). He knows that his horse is tired and needs to rest, but if he stops, the bandits will catch up and kill him. If he doesn't stop, his horse will eventually collapse and die.

So he keeps spurring his horse on, hoping for a miracle.

solipsist said...

A lot of bagholders are going to take it in the shorts.

Or in the bag.

I think it would be a huge mistake right now to buy something like that.

So do I. In fact, I think it is a big mistake to buy anything right now (other than canned goods and ammunition. Grin).

Comment deleted
This post has been removed by the author.

9/15/2007 6:23 PM

I don't know about the rest of you, but I always wonder what they wrote, and why they deleted it.

I lay awake at night, wondering, and wondering.

casual - another great analogy. Thanks for that.

I take it that the horse would represent the debtor. As usual, it is the faithful, dumb animal that bites it, and the heartless rider just gets a new mount. The bandits (creditors) get the loot regardless.

Do any ever entertain the thought that it is all by design? Is that why the rich keep getting richer, and the poor poorer? Let's create a bubble through advertising (a most sinister and calculating science), and round up all the loot.

People talk about "the psychology" of the market, but who "created", or instigated that psychology?, and why?

PT Barnum spake the truth about suckers.

Anonymous said...

The market is going to crash soon. Sell as soon as you can. See now. Take any offer. 60% drop is coming. The RE agent asked us to lower our asking price by more than 10%.

patriotz said...

Am I the only one to find it ironic that this week's mayhem coincided with Ozzie Jurock's "RE Insider" shindig? Wouldn't it be great if it coincided with the market top in Vancouver (as is becoming increasingly likely).

It would have been interesting to hear what the audience were saying. But not enough to make the admission worth it of course :-)