Economic Crisis of 2008/2009

[NakedAngelX]

Lol blame Canada
Even though we're so damn close to US, and suppose to be most heavily effected. We're not. (One of the largest bank here in Canada HSBC even said we're fine on our own, don need government help. Though it is pretty bad news for people in real estate business right now, a friend of my dad can't even sell a single house now, got buyers got those buyers can't get loans from bank)

As for China and Japan. They're pretty heavily effected. Not sure for Japan, All banks in China are government owned. And the debts they bought from US alone is over hundreds of billions dollars. It hit them pretty hard.

[LustfulEnvy]

My god! Im already feeling the effects of the second coming of the great depression... My friends moving back to a two bedroom apartment, what a step down.

[4Tran]

Originally Posted by Xellos-_^

i get it this whole economic mess was created by the canuck to take over the world.

Blame Canada

It's a little premature to do that. You should wait about six months when Canadian banks start swallowing up what American banks survive that long. Lest you think that I'm making this up; from the Globe and Mail:

http://www.reportonbusiness.com/serv.../Business/home

Yet today, amid the worst financial crisis in a generation, those predictions have been turned squarely on their head. While Wall Street titans succumb to a credit meltdown, spreading their contagion to Europe, the Canadian banking system has emerged as the most stable and best performing in the world.

Three Canadian banks are now in the top 10 in North America by market value, and the remaining two are not far behind.

<SNIP>

Canadian banks have historically been more cautious lenders than their U.S. peers, preferring to hang on to most loans they underwrite rather than package them off in complex securities to third parties.

The numbers bear this out: As of the end of last year, only 23 per cent of mortgage loans in Canada had been securitized, with the remainder sitting on the balance sheets of federally regulated institutions. In the U.S. market, by contrast, 51 per cent of mortgage debt had been moved off balance sheets through securitization, much of it Byzantine.

Ian de Verteuil, a BMO Nesbitt Burns analyst who compiled the numbers in a recent research report, noted that there are several problems with such a heavy reliance on securitizations. Underwriting standards become less stringent (if you're not keeping a loan on your books, there's less reason to be picky); the complexity of the securities backed by these mortgages require more reliance on rating agencies, which have shown themselves to be sorely lacking; and the fact that many of these securities are held by unregulated entities like hedge funds makes central bank interventions less effective.

“We believe the fundamental difference between the Canadian and the U.S. banking systems is that Canada still effectively runs an on-balance-sheet banking system, while the U.S. does not,” Mr. de Verteuil wrote in his report.

This is not to say there haven't been problems: several of the banks have had exposure to subprime mortgages and faltering bond insurers.

CIBC, the worst hit, suffered almost $7-billion in writedowns.

Even so, the capital position of these banks remains very strong, and investors noticed have this. Although the index of Canadian banks has fallen about 10 per cent this year, that is far less than the U.S. industry (25 per cent), Europe (38 per cent) or Asia (37 per cent). And this relative strength has catapulted RBC to the number four ranking among North America's big banks – a big leap, considering its planned merger with BMO in 1998 would have made the combined company a distant 10th.

Instead of being devoured, the Canadian banks might do some devouring of their own. Chief executives of the Big Five are being pitched daily on potential acquisitions in the U.S. sector, and most believe they will find some bargains to fuel their expansion.

Originally Posted by NakedAngelX

Lol blame Canada
Even though we're so damn close to US, and suppose to be most heavily effected. We're not. (One of the largest bank here in Canada HSBC even said we're fine on our own, don need government help. Though it is pretty bad news for people in real estate business right now, a friend of my dad can't even sell a single house now, got buyers got those buyers can't get loans from bank)

As far as I can tell, HSBC is actually a Hong Kong bank, and while it's Canadian operations seem to be in decent shape, some of its other operations are nowhere nearly so healthy. Still, their points are quite valid.

Then again it's not really that hard to be in good shape when the American banking industry, as a whole, is insolvent.

Originally Posted by NakedAngelX

As for China and Japan. They're pretty heavily effected. Not sure for Japan, All banks in China are government owned. And the debts they bought from US alone is over hundreds of billions dollars. It hit them pretty hard.

The Chinese banking system should be in decent shape because most of their domestic assets are relatively secure. Even their foreign (mostly American) investments are pretty safe since so much of it is in Treasury bills, and while most of the rest are risky (in Fannie & Freddie and so on); they're also all but guaranteed by the U.S. government. The dirty secret is that the U.S. absolutely needs China to stay in good financial shape and on very friendly terms - a Chinese refusal to lend money to the U.S. is possibly the fastest way to collapse the American economy. Hence, there's a lot of talk out there that one prime purpose of the $700 billion bailout is to buy out toxic papers held by the Chinese.

[Solace]

Bank of America Countrywide rescue plan

I've been helping my mother fight to save her house for over six months now, I hope this will finally be the help we need to get her out of this mess.

I sometimes wonder if this is what Congress should have been doing instead of bailing out from the top. McCain's plan about buying into every mortgage (or something like that) seems very unconservative but compared to the government spending so much with the banking bailout....

[Tri-ring]

Originally Posted by 4Tran

The Chinese banking system should be in decent shape because most of their domestic assets are relatively secure. Even their foreign (mostly American) investments are pretty safe since so much of it is in Treasury bills, and while most of the rest are risky (in Fannie & Freddie and so on); they're also all but guaranteed by the U.S. government. The dirty secret is that the U.S. absolutely needs China to stay in good financial shape and on very friendly terms - a Chinese refusal to lend money to the U.S. is possibly the fastest way to collapse the American economy. Hence, there's a lot of talk out there that one prime purpose of the $700 billion bailout is to buy out toxic papers held by the Chinese.

You're missing out one thing, the Chinese Waun is pegged to the dollar and the Tresury bills are used as reserve or deposit to keep the Waun in synch. The present world standard for currency is fiat money backed only by use of' "lawful force and legal tender laws" of the government. What this means is that Chinese Waun's legitmacy was backed by US dollar so when the US dollar deflates so does the Waun.
The problem with this is that when the US dollar plummets the Waun plummets with it. So all the assets in Waun will relatively shrink as the value of the US dollar goes down. Meaning less import power for PRC meaning their domestic economy will slow down as well.
An export based economy is good only when international trade is health. Once that stagnates the domestic economy is affected possiblly goiing into a stagnation.

The biggest worries for the US is OPEC which has been discussing about decoupling their currency from the dollar, the major factor in keeping the US dollar competetive in the global currency market. When this happens it's bye-bye pax-americana.
If this happens it may trigger a coup in the US since the federal government will not be able to finace the enormous military-industrial complex.
(This is what led to Imperial Japan's demise in the 30's)

[TrueKnight]

Originally Posted by 4Tran

As far as I can tell, HSBC is actually a Hong Kong bank, and while it's Canadian operations seem to be in decent shape, some of its other operations are nowhere nearly so healthy. Still, their points are quite valid.

No it's not, HSBC is a UK fully owned bank with its group headquartered at the UK. It's strongest branchest is at Hong Kong and accross Asia though. HSBC is one of the strongest global financial juggernauts in the world. Even with all this they still applied for the bailout in the UK. So yeah they got hit pretty hard too.

[4Tran]

To further illustrate just how futile the American government's efforts have been, AIG just asked for another $37.8 billion in loans after they blew through the original $85 billion in 3 weeks:
http://money.cnn.com/2008/10/08/news...ex.htm?cnn=yes

Originally Posted by CNN

The New York Federal Reserve is lending up to $37.8 billion to AIG to give the troubled insurer access to much-needed cash. The new program is on top of the $85 billion the federal government agreed to lend to AIG last month to prevent the global company from collapsing,

This puts the total pumped into this mess at close to $1.5 trillion without counting the $700 billion bailout. One of these days, this is going to sound like real money...

In other news, Iceland is one thing, but it looks like Pakistan is in a very similar boat:
http://www.telegraph.co.uk/finance/f...ankruptcy.html

Originally Posted by Telegraph

Pakistan's foreign exchange reserves are so low that the country can only afford one month of imports and faces possible bankruptcy.

The big difference there is that they're asking for $100 billion, and everybody expects them to default on any loan (who the heck's going to give out a loan to a CCC+ credit rating?). Interesting times indeed...

Originally Posted by Tri-ring

You're missing out one thing, the Chinese Waun is pegged to the dollar and the Tresury bills are used as reserve or deposit to keep the Waun in synch. The present world standard for currency is fiat money backed only by use of' "lawful force and legal tender laws" of the government. What this means is that Chinese Waun's legitmacy was backed by US dollar so when the US dollar deflates so does the Waun.
The problem with this is that when the US dollar plummets the Waun plummets with it. So all the assets in Waun will relatively shrink as the value of the US dollar goes down. Meaning less import power for PRC meaning their domestic economy will slow down as well.

The yuan is no longer pegged to the U.S. dollar; instead, it's based on the value of a range of different currencies. China does use its foreign reserves of dollars to control the value of the yuan, but this isn't all that great a dependence. The bigger problem for China is that a weakened dollar would mean less profitable exports and the value of the $1 trillon+ dollars they have is also weakened.

Originally Posted by Tri-ring

An export based economy is good only when international trade is health. Once that stagnates the domestic economy is affected possiblly goiing into a stagnation.

China's domestic consumption has grown enough that, while a major drop in trade would be very painful, the rest of the economy should be able to stave off any major contractions. Couple that with healthy levels of savings, and China's ability to recover is quite significant.

Originally Posted by TrueKnight

No it's not, HSBC is a UK fully owned bank with its group headquartered at the UK. It's strongest branchest is at Hong Kong and accross Asia though. HSBC is one of the strongest global financial juggernauts in the world. Even with all this they still applied for the bailout in the UK. So yeah they got hit pretty hard too.

You're right. I just remebered it as the "Hongkong and Shanghai Banking Corporation".

[Hari Michiru]

I can sense a depression coming...so glad I didn't just graduate from university yet. *still leeching off my parents*

[Vexx]

heh.. then hope your parent's assets aren't decimated.

[Hari Michiru]

Originally Posted by Vexx

heh.. then hope your parent's assets aren't decimated.

*sob* You broke my bubble of happiness and bliss.

[4Tran]

Originally Posted by Vexx

heh.. then hope your parent's assets aren't decimated.

The good news here is that the FDIC is the government organization that has done the best job during this crisis. That means that any bank deposits of $250,000 or less in a single bank will be insured even if that bank goes under. Unfortunately, it looks quite likely that there will be more such failures in the near future. The important thing is to make sure that any deposits are covered by FDIC in case the worst happens.

[Vexx]

True, but I wasn't assuming she's in America.

Also, FDIC or not... my families assets are being decimated (faster than many of them could move it). Assets as in real estate, property, 401K, mutual funds, IRAs, stocks, etc. At this point, basically everyone has to grit their teeth and wait til the value returns.

FDIC only helps for cash that was in a checking/savings account (which meant it wasn't really earning anything and wasn't being "put to work for you" like all the financial people advise ).

Government bonds (local or federal), public utility stocks/bonds, and Treasury bonds appear fairly predictable for the time being. Many of them also benefit from being tax-exempt.

[4Tran]

Originally Posted by Vexx

True, but I wasn't assuming she's in America.

Ahh... Hari Michiru's Canadian - that should teach me to make blanket assumptions . In that case, she should be in much better shape since there's no real danger of any major Canadian banks failing, and a recession should hit there much lighter than the one in the U.S. Moreover, there's also much less need of government intervention as well. Heck, the economic outlook is positively beaming compared to other countries:
http://www.cbc.ca/money/story/2008/10/08/imf.html

Originally Posted by CBC

Canada will lead the other G7 countries in economic growth in 2009, a muted honour considering that the global economy should slow markedly, according to a new IMF study released Wednesday.

The International Monetary Fund said this country should see economic growth in the range of 1.2 per cent next year, less than half of what Canda experienced in 2007, but the best performance among Japan, the United States, Italy, France, Germany and the United Kingdom.

Of course, that's not going to help Canadian stocks in the short term (they're a little hard to gauge right now since the TSX is affected too much by commodity prices). It's also worth noting that the IMF figures are probably extremely optimistic.

Originally Posted by Vexx

FDIC only helps for cash that was in a checking/savings account (which meant it wasn't really earning anything and wasn't being "put to work for you" like all the financial people advise ).

The funny thing is that a lot of financial people are now advising that you put money into $100,000 CYA bank accounts (now upped to $250,000 of course).

[Tri-ring]

Originally Posted by 4Tran

China's domestic consumption has grown enough that, while a major drop in trade would be very painful, the rest of the economy should be able to stave off any major contractions. Couple that with healthy levels of savings, and China's ability to recover is quite significant.

The PRC economy isn't that rosy if you ask me.



If I read this chart correctly the fall was before the US finacial crisis meaning the PRC had a burst from their Olympic economic bubble. Which also means that the domestic market has not matured enough without an external demand.

Also as you have wrote, the Yaun is not pegged to the dollar anymore but they still try to manage their currency rate meaning deflation of the currency within the basket directly connects to deflation of their own economy.
I do not believe the so called Asian decoupled economy theory basically because due to globalization of economy no single nation can be independent from another nation no matter how little direct relation there are between two nations there will always be a domino effect.
Domestic consuption can only be maintain if all product can be procured domestically which is basically impossible needing to import natural resources, technology and equipments. Meaning you need to export goods to acquire necessary foreign currency to import.
That is what globalization means but as I have wrote earlier the United States was a unique case were they didn't need to export since the transaction currency for oil was set on US dollars so there was a strong demand for the dollar no matter how little acutal American goods competed within the global market.
Basically it all depends on how strong the fundementals are of a nation.
(Natural resources, quantity and/or quality exportable goods, global technological edge, strong working force and sound governmental basis.)

[TinyRedLeaf]

Sign of the times

NEW YORK (9 Oct 08): The US government's debts have ballooned so badly the National Debt Clock in New York has run out of digits to record the spiralling figure.

The digital counter marks the national debt level, but when that passed the $10 trillion point last month, the sign could not display the full amount. The board was erected to highlight the $2.7 trillion level of debt in 1989.

For the time being, the Times Square counter's electronic dollar sign has been replaced with the extra digit required. For its part, the digital dollar symbol has been supplanted by a cheaper version - perhaps a sign of the times for the American economy.

- BBC News

[Paladinoras]

There is only one solution.

Get Bill Clinton as President again. And make all his staff men now.. .

[TigerII]

Eh, Bill is one of the causes. His legislation to allow the less wealthy to get homes is what led to the banks giving out loans as long as you had a heartbeat. But the current administration had years to fix this. The early signs were appearing in 2003.


I wonder what the state of the world will be in 5-10 years.

[4Tran]

Originally Posted by Tri-ring

The PRC economy isn't that rosy if you ask me.

My point isn't about how rosy the economy is, it's about how China has a better ability to recover from the current events better than many other countries. Moreover, one of the lessons that we should be learning from this mess is that the shape of an economy isn't necessarily reflected in its stock market performance.

Originally Posted by Tri-ring

Also as you have wrote, the Yaun is not pegged to the dollar anymore but they still try to manage their currency rate meaning deflation of the currency within the basket directly connects to deflation of their own economy.

The yuan is only tied into the other currencies as a way of stabilizing it (well, for the most part, anyways). If this system leads to less stability rather than more, then it isn't all that big deal to unpeg it and to allow the yuan to float more. Heck, this is precisely what the U.S. has been asking China to do for at least a decade now.

Originally Posted by TigerII

Eh, Bill is one of the causes. His legislation to allow the less wealthy to get homes is what led to the banks giving out loans as long as you had a heartbeat. But the current administration had years to fix this. The early signs were appearing in 2003.

While Clinton is probably not going to be any sort of solution, I want to clarify that this crisis is a banking problem. While it originated in home mortgages, it could have started out as any sort of asset bubble, whether it's real estate or stocks or tulips. If it really were mostly an issue of subprime mortgages, then there wouldn't be such a monetary black hole effect right now (subprime mortgages total up to just $250-300 billion). The real issue is that these mortgages were repackaged and leveraged so that there's many trillions of dollars of value on paper, but the assets that they're supposed to be based on are only a trifle of that. The investment banks and ratings agencies are probably more at blame than the mortgage lenders.

I wouldn't be too surprised if this whole mess would have still occurred if the mortgage industry had been properly regulated to begin with.

[Realist_Classic]

Originally Posted by Paladinoras

There is only one solution.

Get Bill Clinton as President again. And make all his staff men now.. .

Not sure if that's what you would like, should Indonesia be in a similar situation it found itself in during 1997-1998. Some observers blame the very people from Clinton's Treasury (i.e. Rob Rubin and Lawrence Summers) along with the IMF for indirectly causing much suffering in your part of the world.

Who can forget images such as this one:

http://www.daylife.com/photo/0374fSX3Zt3Yw

[Tri-ring]

Originally Posted by 4Tran

My point isn't about how rosy the economy is, it's about how China has a better ability to recover from the current events better than many other countries. Moreover, one of the lessons that we should be learning from this mess is that the shape of an economy isn't necessarily reflected in its stock market performance.


The yuan is only tied into the other currencies as a way of stabilizing it (well, for the most part, anyways). If this system leads to less stability rather than more, then it isn't all that big deal to unpeg it and to allow the yuan to float more. Heck, this is precisely what the U.S. has been asking China to do for at least a decade now.

Oh boy.

I really do not know how much you have invested in PRC economy but stocks are index to the health of it.
Yeah, Yeah, I know you would counter that the trend was that investement will be placed in short term funds and not mid-long term funds and that funds were pulled out prematurely but that still does not explain the drop before the crisis and certainly does not give any reassurance of a healthy PRC economy without foreign investements in the future that is for sure.
It also does not answer how PRC is going to beat the odds of globalization.
The yaun was pegged for more than two decades and under "rehab" for the last
three years, do you think it was able to gain reliabilty by the global community within such short time?
No matter how much PRC swears and promises that it's economy is stable to the world it is up for to the investors to decide and seeing the chart I believe it was a vote of no confidence before the crisis.