Comments on: Credit Crisis Worse Than Long-Term Capital Management Collapse in ’98

By: antony clark

antony clark — Wed, 29 Oct 2008 04:45:26 +0000

World GDP is $us54 trillion, and tax collections probably run at $1 trillion per month. The acute shortage of credit could most easily be fixed by delaying tax collections for a month and making up the deficit with new money. The value of money relative to assets would fall, ie prices would be restored, and there won't be a credit crisis. The delay in tax collections would then have to be progressively reduced back to what ever it was before, otherwise there would be inflation.
$1 trillion is, I understand, 5 million crazy mortgages at $200,000 each. If house prices were restored, these mortgages wouldn't seem quite so crazy, and lenders might get their money back eventually. But still, 5 million houses that people cannot really afford to own is a problem that won't work out for a while.

By: Bob

Bob — Wed, 26 Sep 2007 23:46:53 +0000

Gold may be the beneficiary of a looming currency crisis aggravated by the chaotic mismanagement of the Bush administration. The only administration in history that fought a war and cut taxes at the same time with Cheney saying deficits don't matter. Is it possible that Cheney has been shorting the currency of his own country?

By: stu mann

stu mann — Sat, 22 Sep 2007 02:16:43 +0000

agreed, except gold is in a final blow off rather than an uptrend. gold broke 500 and has been hovering near the 700 level as a result of the BOJ's irresponsible reflation attempts a few years ago. basically what happened was the big boys caught on late to the trend and they've been throwing their loose change at it ever since.

but with no "lender of last resort" anywhere in the world to keep reflation going, gold will fall. Many consider China the new economic powerhouse - but China only amassed large reserves largely by ignoring its own capitalization needs.

I agree with R. Prechter's assessment - gold will fall alongside the rest of investments, just as it has risen alongside them the past couple years.

By: Gunga

Gunga — Fri, 21 Sep 2007 13:35:03 +0000

So what do we do to insulate ourselves from the coming crisis?

By: Coffee Addict

Coffee Addict — Fri, 21 Sep 2007 01:58:49 +0000

Mark

I fear that synthetic CDO market will follow in the footsteps of residential mortgage hased CDOs.

Issuing insitutions are exposed to very high risk because they have a leveraged hold on most of the equity tranches.

Investors who purchase a CDO based on credit defalt swaps, you are essentially selling insurance to another party. When a super typhoon arrives insurance companies can go bust. And the eye of the toxic credit typhoon seems to be strengthening.

How can commercial default rates remain low in the midst of a major US recession and inflation cycle? There has to be some global impact.

Are the bulls out there blinkered or are bears like me missing something?