Armageddon

right on both accounts Uncle Festivus,but you gotta keep a sense of humour
in even this downhill old world.

trillionaire#1 said:

right on both accounts Uncle Festivus,but you gotta keep a sense of humour
in even this downhill old world.

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Well, if it's any consolation to all who are losing or lost money, I think the world will be a better place because of it, when we come out the other side?

Uncle Festivus said:

Well, if it's any consolation to all who are losing or lost money, I think the world will be a better place because of it, when we come out the other side?

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Totally agree Uncle.

I've noticed a negative sociological change during this credit boom that I'm pretty sure will correct itself as a result of the bust.

There was even a program on the Beeb today on this very topic. There was even a city banker ffs who held the same view.

my car may well start but ill no longer have petrol money as a TRADER!lol

wayneL said:

Totally agree Uncle.

I've noticed a negative sociological change during this credit boom that I'm pretty sure will correct itself as a result of the bust.

There was even a program on the Beeb today on this very topic. There was even a city banker ffs who held the same view.

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Agreed.

We can then go back to putting emphasis on the things that matter in society, and pay and respect those rightfully who at the end of the day, are the back bone of the country.

I'm looking at you teachers and nurses, and the people and places that train them.

Also, I can go back to being a marxist.

trillionaire#1 said:

my car may well start but ill no longer have petrol money as a TRADER!lol

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Buy a bike.

It's the way of the future.

It seems the emp blast occurs when the bomb goes off. I'd like to know why in movies all the cars stop working before the bomb goes off.

Things bad I am eating the dates of the calendar. What is the best to buy Gold bar/s Gold coins Sovereigns ? If coins which ones.
Any one got a spare can opener?

Greg71 said:

You know, even if the market totally collapses, everyday life here goes on. Like, let's say tomorrow it opens at 2500. Your car will still start, all the shops will be open etc. It's not like everyone's tyres will explode and all electrical equipment will cease to function like when a nuclear device is about to go off.

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For a while, but it's not just equity markets. What happens when somebody goes to get a business loan to keep his business going. Bank manager says "sorry, we are unable to give out credit anymore". So, they go out of business rather quickly as they can't pay suppliers, debts, etc. They also owe a few other businesses money, so they also go out of business as lots of people owe them money as well, as they can't get loans to cover the difference.

For many smaller businesses, even $50k or similar that is lost as a result of somebody else going into administration is enough to severely impact their business. If they're close to the edge anyhow, they will fall over/default also.

Businesses start defaulting all over the place, tens of thousands of workers are very quickly put out of work work, incoming payments to banks dry off, people panic, pull their money out of the bank. Banks collapse due to below required adequacy ratios. This all feeds back upon itself of course.

You go to the bank to pull out your money, ATM says "error", you go _____ (insert swear word). Basically all your money has gone anyhow. So whatever you have in your pocket is all you have to survive off. Everybody else is in the same situation, forcing many to get desperate and raid supermarkets, etc for food.

Government puts in emergency measures to try and prevent the flow, many of which are too late, take too long to implement anyhow.

There we go, Armageddon Note this is an extremely simple view, but sometimes you have to wonder how quickly it could happen, if it was in fact possible.

gfresh:Thanks for the attempt to outline how things might actually go down... I see an awful lot of hysteria and little concrete forecasting of what could actually happen, and in what sequence. I've been reading Larouche for a while and whilst he called the current problems years ago, he always goes on about "armageddon" is here etc. He's not the only one to use such vague terms

I have a question: what form might Armageddon take if the current bailout strategy continues to be followed ? Hyperinflation, stagflation and an eventual similar sequence ? I think our reserve bank has only just started the printing money phase.

Really, only the financially illiterate didn't see this coming. Most of us knew that the Ponzi scheme will one day collapse. We just wanted to make as much money as possible before it all went south. Some got out in time, some didn't.
It is simply a huge transfer/dislocation of wealth happening.

Governments will not allow the great depression to happen again. It may mean a very long drawn out recession. It may mean a bankrupt US. But there will not be long lines at the soup kitchen.

One thing to note, a capital crunch simply means a long drawn recession. A liquidity crunch is a shot in the head ie. instant death. As long as Govts keep sufficient liquidity in the market, we should all merely be in for a long recession, one that we need to weed out all the excesses/sins of the past. If Govts did what the US Fed did in the great depression ie. turn off the liquidity tap, then be prepared for Armegeddon.

Ah Pek said:

Governments will not allow the great depression to happen again. It may mean a very long drawn out recession. It may mean a bankrupt US. But there will not be long lines at the soup kitchen.

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Man, you have a lot of faith in governments!!!

The media and govt (and many people also) seem to think govts can stop consequences, legisalate that stock markets only ever go up, that housing never goes down, and nobody ever goes broke, no matter how much they gambled with money they didn't have.

If you have a bankrupt US - that will be a Great Depression.

The US had great Depression, they don''t have Weimar Germany in their collective memory, so they think printing is better. There's not much difference in the results on the streets.

are these people claiming it's the end of the world trying to be funny? Guess I shouldn't be reading a thread called 'Armageddon' for sensible market analysis

mrfirkin said:

Hi folks,


Loving this!

I'll revisit in another 12 months or so (if we still have electricity, and are not rioting in the streets & begging for food). Hmmm, that's probably a couple of years down the track, but now with that stupid looking prick Kevin 'bloody' Rudd and his nervous looking co-hort Wayne Swan at the helm, its a certainty.

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So the farmers etc are suddenly going to stop producing crops ?, Oil and onther energys are going to spike so high in price that infristructere and utility companys will stop opperating ?.

And all this is a certainty, due to Kevin Rudd being our PM

Look forward to you revisit in 12 months

Greg71 said:

You know, even if the market totally collapses, everyday life here goes on. Like, let's say tomorrow it opens at 2500. Your car will still start, all the shops will be open etc. It's not like everyone's tyres will explode and all electrical equipment will cease to function like when a nuclear device is about to go off.

Incidently, why does electrical stuff stop working just before a nuclear detonation? Hmmm...I hear Google calling.

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It takes about 9months for the events on wallstreet to filter across into main street. The concern is loss of jobs and that then has an impact on a lot of other areas.

Edit: I think it is likely that the US will go through a severe recession and possibly a depression but not another 'great depression'.

THe reason is that back in the 30s it was all about 'industry'. Now the US is a very 'service' based economy that has sectors such as Information technology etc to help it.

alwaysLearning said:

THe reason is that back in the 30s it was all about 'industry'. Now the US is a very 'service' based economy that has sectors such as Information technology etc to help it.

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If you have missed the recent developments. India is a leading service oriented country. IT is also a strong plus for India.

The only main benefit of the USA was if you have a good idea you can make it happen. Many venture capitalist will be willing to support new technology. With credit crunch this will happen less and less.

Apart from that, if you look at the individual components of all the IT products, you will find most of them are developed in China, Malaysia, South Korea, Japan and Taiwan. Strange isn't it. The shift is happening, it was slow and steady, just like a tortoise, while the rabbit of USA is caught sleeping.

Uncle Festivus said:

The millenium bug was fact - certain computers were vulnerable, including some we had where I work (electricity generation), that posed a real threat if it were not for the huge effort in replacing the affected PC's.

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One thing I've been thinking about is the financial stability of the privately owned infrastructure companies, especially electricity.

Already the Tasmanian state government has bought out a privately owned power station in order to get the plant running and avoid blackouts (effectively putting the whole power industry in Tas back in government hands).

How long before we see the same in Victora or see NSW bailing out toll roads etc?

With all the financial deals that get done, our critical infrastructure is very vulnerable to parent company financial failure in my opinion.

Average Americans may be forgiven for not understanding why Congress is moving so quickly to pass this massive bailout package. Sure the economy isn’t great””gas prices are still high, it’s harder to get a home loan, some folks have lost jobs””but why are guys close to Paulson saying things like this (from the Times of London):

“the economy is dropping into the john. We could see falls of 3,000 or 4,000 points on the Dow [it's at 11,000 currently]. That could happen in just a couple of days.

“What’s being put around behind the scenes is that we’re looking at 1930s stuff. We’re looking at catastrophe, huge, amazing catastrophe. Everybody is extraordinarily scared. It’s going to be really, really nasty.”

Whoa! Didn’t the economy grow last quarter? We haven’t even determined that we’re in a recession. You’re telling me we’re going to skip right over that and go straight into a Depression?! In a matter of weeks!?!?!

I’m here to tell you they’re not kidding. It could be that bad. And it could happen VERY quickly. Indeed, the scariest thing about this crisis is that those who really know what’s going on are the most frightened.

What is an economic catastrophe? Besides a precipitous fall in the price of stocks and other assets, we may also see a global run on banks.

Here’s a very famous movie scene to help us understand what we’re potentially facing…..

What we have here is a typical bank run. When Jimmy Stewart goes in the back, you hear his associate say that they have no money to give customers, which is why he closed the doors. This caused an immediate loss of confidence in the bank and Stewart’s depositors panic. They literally run to the bank to withdraw everything they can before it’s too late. But there isn’t enough on hand, so they take what little they can get.

When people lose confidence in their bank, they panic. Ask yourself what you would do if you thought your bank was going out of business. Perhaps you’d run to the bank as quickly as possible in order to take all your money out. If everybody does this at once, the bank goes out of business very quickly.

That’s because banks never have ALL your money. In a fractional reserve banking system, banks only keep a fraction of your deposits in reserve. The rest is lent out. If the bank has given loans to people who don’t pay them back, the money is gone.

This happens all the time. Foreclosures, failed land deals, defaulted car loans, these aren’t rare. And banks (are supposed to) keep sufficient reserves to protect themselves.

But over the last five years, lending standards got so bad that banks lost an extraordinary amount of your money. And confidence across the whole system has been shaken. We’ve already seen bank runs all over the world. Some have looked like the movie scene above””IndyMac in CA, Northern Rock in the UK, Bank of East Asia in Hong Kong. While there were no pictures on TV, WaMu had its own bank run as depositors withdrew $16.7 billion in the nine days leading up to September 25th. The bank failed and was sold to JP Morgan.

There have been far larger bank runs, however. Fannie and Freddie were put out of business when creditors stopped lending to them, the five investment banks and AIG disappeared because they lost access to capital.

The next dominoes to fall may be National City and Wachovia here in the U.S., Bradford and Bingley in the UK, and Fortis in Belgium. Wachovia’s balance sheet is larger than WaMu’s, itself 8x larger than the previously largest bank failure. At $871 billion, Fortis’s balance sheet is larger than the two countries in which it is based (Belgium GDP = $343 billion; Netherlands GDP = $529 billion).

If WaMu can fail, and Wachovia is next, can Citigroup be so far behind?

My point is, it may only be a matter of time before YOU lose confidence in your bank and decide it’s safer to keep your money under your mattress. FDIC insurance is comforting, sure. But if I think my bank is going out of business, I’ll have my money now thank you very much. If everyone decides to do this simultaneously, the worldwide financial system literally ceases to function. You lose access to whatever money you’ve saved in the bank. Companies everywhere fail to make payroll.

Economic activity doesn’t just slow down. It stops.

That’s why everyone in Washington is panicking. They see bank runs spreading everywhere, from “Wall Street to Main Street” so to speak.

And they hope that passing a massive bailout will arrest the confidence contagion spreading through the banking system.

As regular readers know, I’ve been pessimistic for some time. And I don’t see this government bailout as a solution. The government may have to spend a nearly unlimited amount of money to bail out “the system.” We’re talking well north of a trillion dollars. That’s money the Feds don’t actually have. They have to borrow it. What if they can’t? What if they borrow so much that interest rates spike and they have to resort to printing money in order to bail out depositors? Now we’re talking higher inflation…..

Either way YOU could lose a lot of money, as your assets/deposits fall in value or disappear when your bank fails or as your purchasing power disappears when hyperinflation destroys the value of American currency.

This is the situation everyone’s facing. And it’s why people at the highest levels of government and finance are panicking.

Merrill Lynch economists have commented on a report released by the IMF today, on the subject of "systemic banking crises"

Among other things, it showed that the average fiscal cost ”” net of any recoveries down the road ”” related to managing a banking crisis is a substantial 13.3 percent of a country’s gross domestic product.

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The government is highly unlikely to make a profit on any recapitalization program.

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The average recovery rate in a banking crisis averaged just 18 percent of the gross costs.

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The IMF report can be found here