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Old 01-26-2009, 08:59 PM   #1
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The death spiral

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The center-right Frankfurter Allgemeine Zeitung writes:

...........

"A vicious circle has begun: Forced sales of securities are pushing down prices, which leads to new rounds of write-offs, causing institutions' capital to shrink -- which in turn makes further sell-offs necessary. The government needs to break through this crisis. Then it will also no longer need to take over the bad risks of the all-too-careless banks."

The financial daily Handelsblatt writes:

"It is not easy to say this loudly and clearly: The German banks are on the edge of the abyss. This is the painful truth, and nothing but the truth. … All of them have been hit (by the financial crisis). We urgently need a 'bad bank' in which a large part of the toxic securities and loans which are still on the banks' balance sheets can be deposited.
The World from Berlin: 'German Banks Are on the Edge of the Abyss' - SPIEGEL ONLINE - News - International

The death spiral of deflation.

Deutschland is one of the more prudently managed Western economies.

Imagine what condition the banking sector is in in the bad boy debt junkie economies (US, UK, Ireland, etc, etc)
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Old 01-26-2009, 09:09 PM   #2
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I think I can now say that I don't find ignorance to be bliss.
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Old 01-26-2009, 09:27 PM   #3
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I think I can now say that I don't find ignorance to be bliss.

My view regarding the Australian banking sector, for what it's worth, is that it is probably in not that bad of a condition. I have read that most of the Aussie banks are fairly ok, with Macquarie and NAB being exceptions. but I think that even the worst of the Australian banks are in a not bad condition compared to the average UK or Irish bank.

Of course, Australia will suffer from the collapse of the commodities bubble, but seems to have a fairly well-diversified economy, from what I can gather.

Overall, I think that Australia and Canada are the best placed of the 'Western' economies, going into the global recession/slump/depression.
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Old 01-26-2009, 11:04 PM   #4
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Overall, I think that Australia and Canada are the best placed of the 'Western' economies, going into the global recession/slump/depression/nuclear winter and thousand-year age of barbarism.
fixed that for you, as people are wont to say these days.

Yeah Australia's banks are not too bad, but our economy is far from diversified. We dig stuff up and export it. The actual people involved in that activity are a minority but I guess the income is highly important to the nation.

Other than that it's mostly services, financial services, some nice restaurants and tourist outfits. We certainly don't manufacture much of note.
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Old 01-26-2009, 11:43 PM   #5
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http://www.nytimes.com/2009/01/26/bu...prod=permalink

Nationalization Gets a New, Serious Look
By DAVID E. SANGER
Published: January 26, 2009
The White House is dancing around a delicate question: Is the president prepared to nationalize the banking system?
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Old 01-26-2009, 11:56 PM   #6
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Originally Posted by financeguy View Post

Overall, I think that Australia and Canada are the best placed of the 'Western' economies, going into the global recession/slump/depression.
Our FDI is immobile, and that's really coming in very handy right now.
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Old 01-27-2009, 04:34 AM   #7
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Our FDI is immobile, and that's really coming in very handy right now.
what do you think of the conservatives recent "leaks" that they're prepared to run a defecit for the next number of years?

i think that's a bit foolish, considering if the economy pulls itself together before then there'd be little reason for canada to run in the red.
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Old 01-27-2009, 07:43 AM   #8
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Originally Posted by Se7en View Post
http://www.nytimes.com/2009/01/26/bu...prod=permalink

Nationalization Gets a New, Serious Look
By DAVID E. SANGER
Published: January 26, 2009
The White House is dancing around a delicate question: Is the president prepared to nationalize the banking system?

He may have to. Americans are losing their jobs and I don't see how our Unemployment System, is going to support all of these families. Hopefully, there will be light at the end of the tunnel.
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Old 01-27-2009, 03:32 PM   #9
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Overall, I think that Australia and Canada are the best placed of the 'Western' economies, going into the global recession/slump/depression.
Canada does look well-positioned, considering that none of their banks are insolvent. Of course, bank fees are also high, and credit interest rates have seemed really quite terribly high as well, even before the crisis happened. As a consequence of this, the fairly non-competitive nature of Canadian banking has made all of them fairly cash heavy for years, meaning that they never needed to veer off into risky investment income.

On the other hand, I've watched the CAD exchange rate between the USD deteriorate to around USD 0.78-0.82 over the last few months. Perhaps I'm a little more worried about this than others, because I have to pay off USD debt over the long term. It really seems to me that no matter how fiscally responsible Canada is, it always seems to sink with the U.S. markets.

Does anyone have any thoughts on this?
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Old 01-27-2009, 05:00 PM   #10
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Oil prices are driving down the Canadian dollar to an extent. You can bet that if we returned to the crazy days of several months ago where we were paying $1.30/litre at the pumps, the dollar would probably hit parity again.

On the one hand, there is some level of national "pride" for lack of a better word in having a dollar hit parity. On the other, there is no huge desire to prop up the currency because it hurts the manufacturing sector, which is particularly low at the moment. So the low dollar is almost seen as a bonus, although obviously not by somebody like you or somebody who is doing a lot of cross-border shopping.
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Old 01-28-2009, 10:18 AM   #11
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I do just find it very curious how quickly the USD can fall against the CAD the minute the stock market has a decent rally. As of 10:10 am today, the USD is down nearly 2 cents against the CAD to almost 0.83, although that can obviously change considerably as the day goes on. On one hand, I think it shows the vulnerability of the USD once the markets improve. On the other, if the bear market lasts for a long time, a weaker CAD could persist, which wouldn't be good for me...heh.
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Old 01-30-2009, 09:49 PM   #12
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Originally Posted by melon View Post
On the other hand, I've watched the CAD exchange rate between the USD deteriorate to around USD 0.78-0.82 over the last few months. Perhaps I'm a little more worried about this than others, because I have to pay off USD debt over the long term. It really seems to me that no matter how fiscally responsible Canada is, it always seems to sink with the U.S. markets.

Does anyone have any thoughts on this?
Speculating on exchange rates is kind of a mug's game (so being a mug, I do it ).

Maybe post a question on an FX traders forum?
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Old 01-31-2009, 07:16 PM   #13
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There is no "market-friendly" solution to this mess folks. There are, however, disastrous decisions that can be taken, and continuing to hide losses - and the truth - will lead directly to that disaster.

We must deal with the bad debt by forcing it into the open. Transferring it from one pocket to another fixes nothing and if we're not careful we will wind up precipitating a bond market collapse coincident with the stock market melting down to a degree that is several times worse than what we saw in September and October.

Unless President Obama wants to be known as our second Herbert Hoover, he must not allow the game-playing to continue any longer.

Neither you or I want to see the S&P 500 collapse down into the 200s with 75% of the listed firms in this country going under. Nor do we want to see 20 or even 30% unemployment. I'm sure you're not interested in seeing not a 30 or 40% loss in your 401k as you had last year, but an 80% loss. And I'm very, very certain that having the government - both state and federal - unable to raise operating funds and being forced to cut off social services and entitlements is not on your "desirable" outcome list. Yet all of this can and will happen if the bond market dislocates and starts a cascade. The price action in the market over the last couple of weeks is a strong warning that "borrow and spend" will not work and the market is getting rather upset with papering over ever-expanding losses.

It would be nice if President Obama had several weeks or even months to coordinate a strategy. Unfortunately the market doesn't work this way, and it appears that he is being forced to either crap or get off the pot essentially now, lest the market decide for him.

On The Edge of The Abyss - The Market Ticker

http://market-ticker.denninger.net/a...-It-Comes.html
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Old 01-31-2009, 11:00 PM   #14
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interesting articles. what is the author's ideological framework?
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Old 01-31-2009, 11:04 PM   #15
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No idea, but I'd guess realism.
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