The next banking crash?

[simoh1490]

The difference between the rich man and the poor man is that the poor man follows all this risk-averse advice, just like the old TVF adage of many years now, don't invest in Thailand or THB - note, proponents of that advice are now resident in their grey, wet home countries once again, lamenting their past lives in Thailand.

[Brunolem]

34 minutes ago, Jimbo2014 said:

A crash soon is almost certain as most financial indicators point to this including the 'Buffet Index'.  However if you look back at past crashes and read headlines of the time, each one predicts apocalyptic end of the world each time it occurs.  The reality is that shares temporarily go down to about 50% for a while - most recover within 80% of lost value within 12 months.  Some companies with bad debts etc. go under.  Dodgy investors get called on margin loans and loose everything.

The reality is that some banks may go under.  Governments have an endless mechanism called QE by which they can print money and either loan it to banks or take share holding in banks.  In the latter case the owners of bank shares are the ones to suffer not those with bank accounts.  Governments are now so tied into banks that they truly cannot fail however small banks may go under and get brought by larger financial institutions during a crash further polarising wealth and ownership.

So before you buy the baked beans and golden shotguns, consider that when asset prices drop, cash is king.  Or as Warren Buffet says "Be fearful when others are greedy and greedy when others are fearful." ie: some great buys on good stocks when the market does eventually crash... as it inevitably will again and again... make sure you are the one left standing with some cash in your pocket for some great deals.

You make it seem as if it was linear, a repeat of the same thing every ten years or so, when in fact it is exponential, each crisis being much bigger than the previous one.

 

Not going back too far, in 2000 and 2008, interest rates were at their usual average level of 5%, and not between 0 and 2% as they stand these days, depending on the countries.

 

So, reducing interest rates meaningfully is a tool no longer available to the central banks.

 

On top of that, the amount of debt on the balance sheets has grown massively between each crisis, and especially since 2008, so much so that the amounf of QE required will be gigantic the next time.

 

And there is always a limit in using the printing press, until faith in the concerned currency is lost and hyperinflation strikes, as it has happened many times in the past, and will happen again.

 

Finally, don't forget that, contrary to the previous crisis, the financial markets today are in the hands of the central banks...just look at the portfolios of the SNB or the BOJ...

 

So, if these markets crash, so do the central banks which, on top of "saving the world" will have to save themselves!

 

The next crisis will be somehow like the one of the 1930s...no way out, save for...(see my previous post)...

Edited September 19, 2018 by Brunolem

[natway09]

I believe in Thailand the maximum in a single standard savings  bank account protected is still 1 mil.

Bit too much war mongering going on for me.

The big 5 in Thailand are as strong as any bank in the world 

[JG27]

6 hours ago, davidst01 said:

cant wait for things to correct. many australians dont think that property prices can decrease. many didnt live through the 80s with interest rates above 10%

so true, we had money on term deposit @ 16% . I dream constantly of a return as do most if not all retirees.

[Suradit69]

3 hours ago, Krataiboy said:

The entire monetary system is built on trust which enables enormous debts to be run up by financial institutions.

Yes, I personally think there will be a massive reckoning eventually because of debt ... personal, corporate and government issued. 

 

Ridiculous non-performing mortgage loans were bundled into massive packages which the rating agencies blithely rated AAA leading up to the crisis in 2008. Now, in the US student loans and automobile loans seem to be heading in the same direction.  

 

At the governmental level we've seen countries in southern Europe and in South America hitting debt levels they can no longer service without creating chaos. Russia has raised retirement age because it won't have the money to continue paying pensions.

 

And the US government is reliant on other countries continuing to buy its unsustainable debt. Even now China is hitting back regarding the trade war  by reducing how much US debt it will hold.

 

At some point the brown stuff is going to hit the rotating blades. Glad I'm old enough to hope I won't be around when it happens.

 

 

[simoh1490]

Your Armageddon scenario would not materialise with a coordinated debt forgiveness plan, it's an easy solution.

[topt]

1 hour ago, natway09 said:

I believe in Thailand the maximum in a single standard savings  bank account protected is still 1 mil.

Bit too much war mongering going on for me.

The big 5 in Thailand are as strong as any bank in the world 

 

4 hours ago, jippytum said:

Some time ago it was proposed that the bank Guarantee on savings accounts in Thailand would be reduced from unlimited to one million baht per account .There was a lot of opposition to the reduction proposal and i understood the reduced limit of one million was never published in the Royal Gazette and deferred.Could anyone please advise the current guarantee applicable .

Thanks    

1 million baht level was delayed. See here - 

http://www.dpa.or.th/ewt_news.php?nid=320&filename=index___EN

 

According to the link currently 10 million.

[Brunolem]

29 minutes ago, Suradit69 said:

Yes, I personally think there will be a massive reckoning eventually because of debt ... personal, corporate and government issued. 

 

Ridiculous non-performing mortgage loans were bundled into massive packages which the rating agencies blithely rated AAA leading up to the crisis in 2008. Now, in the US student loans and automobile loans seem to be heading in the same direction.  

 

At the governmental level we've seen countries in southern Europe and in South America hitting debt levels they can no longer service without creating chaos. Russia has raised retirement age because it won't have the money to continue paying pensions.

 

And the US government is reliant on other countries continuing to buy its unsustainable debt. Even now China is hitting back regarding the trade war  by reducing how much US debt it will hold.

 

At some point the brown stuff is going to hit the rotating blades. Glad I'm old enough to hope I won't be around when it happens.

 

 

The Fed hiking rates is going to be the catalyst, as they were in 2008.

 

Buying the US debt is not really the problem since the banks are doing it by creating money as much as necessary...interestingly the official documents show that the only buyers of US debt are...others! a space usually reserved for marginal buyers who don't deserve a separate line.

 

The problem is that it is going to be more and more difficult to pay the interests which are increasing, while everyone and everything is in debt up to one's eyeballs...

[Brunolem]

7 minutes ago, simoh1490 said:

Your Armageddon scenario would not materialise with a coordinated debt forgiveness plan, it's an easy solution.

Simoh, if I may...

 

Don't forget that the whole financial industry, on which countries like the UK almost entirely rely, is based on debt!

 

It makes money creating, selling, bundling, reselling, debt, not assets.

 

Assuming that it would be possible to somehow erase the debts, it would simultaneously erase the financial industry.

 

On top that there would remain the pesky problem of dealing with quadrillions, not trillions, of derivatives which, for the most part, are linked to debt.

 

Finally, one would have to assume that all the concerned entities, worldwide (globalization) would play ball, which would be highly unlikely since creditor countries would not exactly be happy to write off billions of foreign debts which to them are assets...

[CGW]

Time for a stupid question ? 

If all debt was repaid today, who exactly would end up better off, who has loaned out all this money, or is it a case of "everybody" who could and can has loaned out whatever they could borrow?

[simoh1490]

1 hour ago, Brunolem said:

Simoh, if I may...

 

Don't forget that the whole financial industry, on which countries like the UK almost entirely rely, is based on debt!

 

It makes money creating, selling, bundling, reselling, debt, not assets.

 

Assuming that it would be possible to somehow erase the debts, it would simultaneously erase the financial industry.

 

On top that there would remain the pesky problem of dealing with quadrillions, not trillions, of derivatives which, for the most part, are linked to debt.

 

Finally, one would have to assume that all the concerned entities, worldwide (globalization) would play ball, which would be highly unlikely since creditor countries would not exactly be happy to write off billions of foreign debts which to them are assets...

Not all the debt, just enough of it to solve the problem.

[Brunolem]

16 minutes ago, CGW said:

Time for a stupid question ? 

If all debt was repaid today, who exactly would end up better off, who has loaned out all this money, or is it a case of "everybody" who could and can has loaned out whatever they could borrow?

Most of the money loaned was created out of thin air by banks and central banks.

 

If the loans were paid back, the money would flow back to the banks and could be simply cancelled out of existence...this actually happens when the central bank, like the Fed these days, wants to shrink its balance sheet...it simply erased both loans and money when they are paid back by the state.

 

Of course, this would be impossible since the actual financial system is based on debt.

 

Money is created as a counterpart to new debt and not to the production of new assets.

 

[Brunolem]

2 minutes ago, simoh1490 said:

Not all the debt, just enough of it to solve the problem.

Actually, if instead of moving the bad debts held by the banks to the central banks, while keeping those same debts in the households' portfolios, or in Greece as a whole, the authorities had erased these debts, things would look much better today.

 

Why save the banks and not the households?

 

That was a very bad decision, in many ways...

[Naam]

On 9/18/2018 at 2:26 PM, Black arab said:

It apparently happens every 7- 10 yrs last one being 2008.

says who?

[Naam]

9 hours ago, Suradit69 said:

10 hours ago, Black arab said:

I ca  only go by what i have seen and read

Unfortunately a lot of what is available to see and read is complete rubbish.

and that applies especially to youtube!

[Peterw42]

9 hours ago, baansgr said:

UK bank balance sheets are are all in the black.  Australia is the place to watch,  40% of mortgage applications were refused,  property prices declining, banks have raised rates independent of the base rate,  looks like those living the high life on equity are in for a shock

Australia never went through the adjustment after the GFC, the Government just kept printing money, its 10 years overdue.

[Brunolem]

26 minutes ago, Peterw42 said:

Australia never went through the adjustment after the GFC, the Government just kept printing money, its 10 years overdue.

Australia went into a bubble inflated by China.

 

When China will slow down or even stall, there will be a big noise made by the air escaping the Australian bubble, notably in real estate.

 

Ditto in Canada...

 

[Black arab]

1 hour ago, Naam said:

says who?

Dot com sub prime and the next is coming so everyone is saying.

[Lacessit]

4 hours ago, JG27 said:

so true, we had money on term deposit @ 16% . I dream constantly of a return as do most if not all retirees.

I don't. That high an interest rate means savings are being eroded by rampant inflation.

[Ks45672]

1 hour ago, Brunolem said:

Australia went into a bubble inflated by China.

 

When China will slow down or even stall, there will be a big noise made by the air escaping the Australian bubble, notably in real estate.

 

Ditto in Canada...

 

Chinese have been major buyers in london and Dublin too

 

[rickudon]

The focus has been on banks. They had there crash in 2008 and are largely in a better state. I had money in Iceland, fortunately UK guarantees meant i got my money back (eventually). My brother, with Halifax shares was not so lucky. Cash is better protected (up to a point).

 

Look at other financial services with big profit and loss sheets for the next crash, if any. Maybe insurance companies? My Thai car insurers have just gone bust because they ran out of money to pay for repairs ..... And property, which is overvalued. I now drive very carefully ....

 

[Jaggg88]

Recently been looking at articles on the web/you tube regarding the next banking collapse.It apparently happens every 7- 10 yrs last one being 2008. 

 

What! I'm 63 years old and although I've experienced many recessions I've only ever known one banking collapse in my lifetime. This was toxic debt caused by subprime loans - <deleted> greedy stupid bankers.

[Ks45672]

4 minutes ago, rickudon said:

The focus has been on banks. They had there crash in 2008 and are largely in a better state. I had money in Iceland, fortunately UK guarantees meant i got my money back (eventually). My brother, with Halifax shares was not so lucky. Cash is better protected (up to a point).

 

Look at other financial services with big profit and loss sheets for the next crash, if any. Maybe insurance companies? My Thai car insurers have just gone bust because they ran out of money to pay for repairs ..... And property, which is overvalued. I now drive very carefully ....

 

Most people in finance say the banks are in deeper shit  than they ever were before..... 

 

[Ks45672]

1 minute ago, Jaggg88 said:

Recently been looking at articles on the web/you tube regarding the next banking collapse.It apparently happens every 7- 10 yrs last one being 2008. 

 

What! I'm 63 years old and although I've experienced many recessions I've only ever known one banking collapse in my lifetime. This was toxic debt caused by subprime loans - <deleted> greedy stupid bankers.

There was the great Asian recession in 97 for one

 

I remember  I was in bkk shortly after, wandering around all the deserted skyscrapers in the city centre because they didn't even take the time to board them up and anyone could walk in 

 

Homeless people sleeping, kids playing, drug addicts etc

 

It was a bit surreal 

[Brunolem]

21 minutes ago, Jaggg88 said:

 

What! I'm 63 years old and although I've experienced many recessions I've only ever known one banking collapse in my lifetime. This was toxic debt caused by subprime loans - <deleted> greedy stupid bankers.

There have been many crisis involving banks one way or another.

 

There was the crash of 1987, the savings and loan crisis lasting from the mid 80s to the mid 90s, the Mexican crisis in 1994, the Russian crisis of 1998 followed by the Asian crisis, then the dot com bust and finally the GFC of 2008/9.

 

Every time, central banks reacted by lowering interest rates and printing tons of money, thus ensuring that the next crisis would be bigger.

 

The one coming is going to be a doozy!

 

Remember that only 1 year of interest rate at 1% was enough to create the housing bubble in the 2000s...what can we expect from almost 10 years of 0% interest rate?

Edited September 19, 2018 by Brunolem

[Jaggg88]

14 minutes ago, Ks45672 said:

There was the great Asian recession in 97 for one

 

I remember  I was in bkk shortly after, wandering around all the deserted skyscrapers in the city centre because they didn't even take the time to board them up and anyone could walk in 

 

Homeless people sleeping, kids playing, drug addicts etc

 

It was a bit surreal 

That was a Governmental currency collapse which caused a massive recession it's not a banking collapse. As I said I've seen many recessions but only one banking crash where governments had to bail out banks.

[Ks45672]

2 minutes ago, Jaggg88 said:

That was a Governmental currency collapse which caused a massive recession it's not a banking collapse. As I said I've seen many recessions but only one banking crash where governments had to bail out banks.

A financial crisis is a financial crisis, it's always triggered by something and has varying affects around the world

 

The world is more interlinked now than ever before and there is not really any strong countries that can bail out the weaker ones because debt is too high nearly everywhere 

[simoh1490]

Not really that high currently, it's all relative:

 

[chicowoodduck]

18 hours ago, Brunolem said:

You are perfectly right.

 

There are plenty of very serious and reliable authors who are expecting what you describe, sooner than later...and most of them indeed strongly recommend to have some gold, preferably in coins and safely stored with you.

 

What some members above don't understand is that in case of major inflation, or even hyperinflation, which is to be expected, as in some EM now, is that the price of gold inflates simultaneously, so that whatever the prices are, you keep your purchasing power, while those who are in fiat currency cash lose 10% or more every week, or month...

 

It is also very likely that the next crash will be much bigger than the previous one, because the amount of debt is at record levels everywhere, especially in the junk debt market.

 

Where things will start to unravel doesn't really matter since, thanks to globalization, everything is connected to everything everywhere.

 

And yes, bail in, as in taking money out of customers' deposits to refinance a bank, are more than likely...why would they have created the new regulations for that otherwise?

 

Normally, one is safe up to 100,000 dollars or euros, guaranteed by the FDIC or other entities.

 

Yet, it may be prudent to reduce that amount by half.

 

Also prudent is to avoid dealing with the too big to fail banks, which are the most rotten ones (Deutsche Bank, BNP Paribas, HSBC, Italian banks and so on...).

 

If you want more information, I can give you a long list of websites and blogs run by serious people, such as David Stockman, former Director of Budget in Ronald Reagan administration.

 

 

 

 

Serious people on the web?  Got my good laugh for the day.....like saying serious people on Thaivisa????

[Brunolem]

3 hours ago, chicowoodduck said:

Serious people on the web?  Got my good laugh for the day.....like saying serious people on Thaivisa????

Depends where you look...

 

The web is like a giant library...you can go to the cartoon section, or to the astrophysics section...there is something for everyone...

 

I would qualify Wikipedia as serious, and talking about forums, go visit the physics forum...you will see if the members are not serious people.

 

As far as blogs are concerned, people like David Stockman or Paul Greg Roberts, former members of Ronald Reagan administration are not exactly jokers, no more than a whole lot other people with a very good background and reputation, such as, for example, John Mauldin, an economist invited the world over to give speeches...read his newsletters, quite serious indeed...

Edited September 20, 2018 by Brunolem