European Banking Crisis

[siamamerican]

I disagree, derivatives are a huge problem but would amount to nothing without foreclosures. EU banks don't have the derivative exposure of US banks and are facing the same issues. I understand derivatives and foreclosures feed off each other, but at this point which evil is worse is hard to grasp.

and i disagree completely with your statement. what you seem to forget is that european (and other) banks were stupid enough to buy the derivatives FROM U.S. banks based on U.S. subprime mortgages. besides that there is no doubt they are facing their own problems concerning financing of real estate.

No, I haven't forgotten the European banks that bought derivatives from the US. Actually I mentioned just that in my original post. IMO, I think European banks biggest issues are extreme leverage and over valued real estate. No really bad news the last few days - maybe the worst if over for banks. Now we will just be stuck in a nasty recession for who knows how long.

[henryalleman]

I disagree, derivatives are a huge problem but would amount to nothing without foreclosures. EU banks don't have the derivative exposure of US banks and are facing the same issues. I understand derivatives and foreclosures feed off each other, but at this point which evil is worse is hard to grasp.

and i disagree completely with your statement. what you seem to forget is that european (and other) banks were stupid enough to buy the derivatives FROM U.S. banks based on U.S. subprime mortgages. besides that there is no doubt they are facing their own problems concerning financing of real estate.

No, I haven't forgotten the European banks that bought derivatives from the US. Actually I mentioned just that in my original post. IMO, I think European banks biggest issues are extreme leverage and over valued real estate. No really bad news the last few days - maybe the worst if over for banks. Now we will just be stuck in a nasty recession for who knows how long.

Already a few topics you are going on about an extreme leverage and over valued real estate. Its clear to me that you ignorant the Europea

[yabaaaa]

the sad thing is that (as usual) those who are financially handicapped will bear the brunt of the crisis

Many are going to feel alot of pain, handicapped or not. People of all income levels forgot about the risks of greed. Ignoring greed is ludicrous, considering that 98% of the population is extremely greedy. Some are just better at harnessing greed and creating wealth.

Everybody needs to take a deep look at themselves before blaming others. E.g., many in the US middle class that purchased homes with no down payments and crazy high debt to incomes, people in Spain that bought homes that went up 100% in value in 8 years, etc...

It's time we stop blaming everyone but the person that signed the note. We aren't apes and perfectly capable of making financial decisions and dealing with the consequences.

Thankfully my conscience is clear Im one of the 2% who didnt i did it the old way and worked and saved....... for a long time. Most I ever borrowed was £15000 for a house in 1996 my deposit for this house was about £40000 in cash.

Still doesnt make things any better no doubt my taxes will pay for this balls up and d espite what they say it will happen time after time after time.

[LaoPo]

IMO, I think European banks biggest issues are extreme leverage and over valued real estate.

A few EU countries have problems, no doubt about that, but it's like the situation in the US, one cannot compare every single state or city with the others.

But there are more EU countries without -overvalued- real estate problems than there are with.

LaoPo

[henryalleman]

I disagree, derivatives are a huge problem but would amount to nothing without foreclosures. EU banks don't have the derivative exposure of US banks and are facing the same issues. I understand derivatives and foreclosures feed off each other, but at this point which evil is worse is hard to grasp.

and i disagree completely with your statement. what you seem to forget is that european (and other) banks were stupid enough to buy the derivatives FROM U.S. banks based on U.S. subprime mortgages. besides that there is no doubt they are facing their own problems concerning financing of real estate.

No, I haven't forgotten the European banks that bought derivatives from the US. Actually I mentioned just that in my original post. IMO, I think European banks biggest issues are extreme leverage and over valued real estate. No really bad news the last few days - maybe the worst if over for banks. Now we will just be stuck in a nasty recession for who knows how long.

Already a few topics you are going on about an extreme leverage and over valued real estate. Its clear to me that you ignorant the Europe

Already a few topics you are going on about an extreme leverage and over valued real estate. Its clear to me that you ignorant about the European real estate situation, and how banks operate to give a loan to buy a house. Second and third mortgages on houses are very very rare over here.

The EU situation where like in the US, banks repossess houses on a big scale because when people are not able to pay their loans is not happening and it will be very unlikely that this will ever happens in the near or far away future. Just because the rules to getting a loan for real estate is more strict in Europe. So bad loans for real estate is rather unknow in Europe.

Also don't forget that in Europe we have a welfare state system, where even you lost your job you still have an reasonable income.

So please don't compare the economic and real estate position s of EU inhabitants with his US counterparts.

The US and EU inhabitants have totally different political and social system and a total different way of living and thinking.

Also the EU economy is a regulated economy while the US is complete free market economy. That's why the EU tax payer has less problems when governments interfere in the banking world, and take control of them.

So the solutions to arrange it will be different also. For Europeans Obama is an Ultra right winger.For Americans hes almost a socialist or commie. This only to show the different way of thinking of the 2 society's

To give you a small example of a Belgian tax payer.

I have to work for the government till September, after September I can, so I work 9 months fore the tax office and only 3 months for myself. This is unthinkable in the US, but frankly, I think they will shoot any politician who will try to impose such welfare state, But frankly I prefer the European system based on solidarity and not each men for himself, because everybody is well protected in all social aspects of life. Health Service, pension, education, unemployment, and have good security when I can't work anymore due to sickness, or get handicapped.

Both continents are used to their system and therefore thinks its the best system for them

[siamamerican]

I disagree, derivatives are a huge problem but would amount to nothing without foreclosures. EU banks don't have the derivative exposure of US banks and are facing the same issues. I understand derivatives and foreclosures feed off each other, but at this point which evil is worse is hard to grasp.

and i disagree completely with your statement. what you seem to forget is that european (and other) banks were stupid enough to buy the derivatives FROM U.S. banks based on U.S. subprime mortgages. besides that there is no doubt they are facing their own problems concerning financing of real estate.

No, I haven't forgotten the European banks that bought derivatives from the US. Actually I mentioned just that in my original post. IMO, I think European banks biggest issues are extreme leverage and over valued real estate. No really bad news the last few days - maybe the worst if over for banks. Now we will just be stuck in a nasty recession for who knows how long.

Already a few topics you are going on about an extreme leverage and over valued real estate. Its clear to me that you ignorant the Europea

I’m not naïve, just a realist that looks at the numbers. Do the research before making unfounded claims. It’s easy – just google leverage EU vs US banks. I’ll help you out with one souce below. Don’t take my word for it - do your own research.

http://www.nakedcapitalism.com/2008/10/why...precarious.html

As for your belief that EU’s extensive welfare system is positive, I think it is a disadvantage. Never needed welfare and would be embarrassed to accept it.

[siamamerican]

IMO, I think European banks biggest issues are extreme leverage and over valued real estate.

A few EU countries have problems, no doubt about that, but it's like the situation in the US, one cannot compare every single state or city with the others.

But there are more EU countries without -overvalued- real estate problems than there are with.

LaoPo

Just my opinion. It could be flawed, but all the data I've seen don't support your claim. Hey, I might just be looking at the wrong data. Any recent sources to support most EU countries real estate is not over valued?

IMO, I thing we are in this mess together.

[Naam]

IMO, I think European banks biggest issues are extreme leverage and over valued real estate.

A few EU countries have problems, no doubt about that, but it's like the situation in the US, one cannot compare every single state or city with the others.

But there are more EU countries without -overvalued- real estate problems than there are with.

LaoPo

Just my opinion. It could be flawed, but all the data I've seen don't support your claim. Hey, I might just be looking at the wrong data. Any recent sources to support most EU countries real estate is not over valued?

IMO, I thing we are in this mess together.

and it will take quite some time till we are out again

[siamamerican]

and it will take quite some time till we are out again

Agree - I'm 85% in cash and 15% fixed income investments (bonds). Bonds are tempting with the high yields, but even a little worried about them losing value.

I've watched too many TV analysts forecasting an end of year recovery the last week and this is definitely a bad omen. What are these analysts seeing that I'm not? Consumers can't tap into equity in their homes which has had a huge incremental impact on consumer spending the last 5 years, no one really understands (including myself) the real impact of credit default swaps, the banks aren't going to flood the market with credit, ...

I might get back into the markets on a small scale after huge drops, but holding long term doesn't seem wise. All the uncertainty will drive prices down in the short term. Not too patriotic, but I can't wait till the sht hits the fan and nobody wants to invest in stocks. With a little luck I'll pick the right time to buy and hold stocks like I've always done prior to 2008.

[henryalleman]

I disagree, derivatives are a huge problem but would amount to nothing without foreclosures. EU banks don't have the derivative exposure of US banks and are facing the same issues. I understand derivatives and foreclosures feed off each other, but at this point which evil is worse is hard to grasp.

and i disagree completely with your statement. what you seem to forget is that european (and other) banks were stupid enough to buy the derivatives FROM U.S. banks based on U.S. subprime mortgages. besides that there is no doubt they are facing their own problems concerning financing of real estate.

No, I haven't forgotten the European banks that bought derivatives from the US. Actually I mentioned just that in my original post. IMO, I think European banks biggest issues are extreme leverage and over valued real estate. No really bad news the last few days - maybe the worst if over for banks. Now we will just be stuck in a nasty recession for who knows how long.

Already a few topics you are going on about an extreme leverage and over valued real estate. Its clear to me that you ignorant the Europea

I'm not naïve, just a realist that looks at the numbers. Do the research before making unfounded claims. It's easy – just google leverage EU vs US banks. I'll help you out with one souce below. Don't take my word for it - do your own research.

http://www.nakedcapitalism.com/2008/10/why...precarious.html

As for your belief that EU's extensive welfare system is positive, I think it is a disadvantage. Never needed welfare and would be embarrassed to accept it.

"As for your belief that EU's extensive welfare system is positive, I think it is a disadvantage. Never needed welfare and would be embarrassed to accept it."

I think you are a little bit mixed up about welfare. I was not talking about receiving food coupons or things like that.

I was talking about a welfare system what is something completely different.

I was talking about a social security system. Some examples.

When you are seriously sick or have major surgery and can't work for a long time you get a monthly income who is almost the same as your regular net income. Everybody has the same good health care regardless your income. The prices of medicines, hospitals and doctors are regulated by the government. This make health care much more cheaper than the States, and nobody is exclude from the system. Because everybody who work is in the system. They cut it imideatly from your salary and also the company where you are employed have to pay an additional % on your salary. So therefore everybody regardless where he work has the benefits.

When you buy medicines you only have to pay a small part by yourself, the pharmacist collect the rest from national health care.

Also education, retirement, unemployment are part of the social security system.

The redistribution of wealth is meaning that an dishwasher in a restaurant who pay 100$ a month for social security get the same medical care as the CEO of GM who pay maybe 10 000$ a month for his social security.

Please don't narrow a welfare state to food stamps. Its much more than that.

A welfare state is an social protection for the employees regardless their salary. So an low salary earner can give his children a good education and good health care to name only a few.

Also a national health care system is not expensive because its financed by the workers themselves, and not by the government, the government is only the distributor and manager of it.

Also people who lost everything due to the banking crisis and have to sleep in their car is onknown in the EU. And is this not an advantage of an welfare state. Also working poor who must have 2 or 3 jobs without health care to keep ends meet is unknow in the EU.

[siamamerican]

"As for your belief that EU's extensive welfare system is positive, I think it is a disadvantage. Never needed welfare and would be embarrassed to accept it."

I think you are a little bit mixed up about welfare. I was not talking about receiving food coupons or things like that.

I was talking about a welfare system what is something completely different.

I was talking about a social security system. Some examples.

When you are seriously sick or have major surgery and can't work for a long time you get a monthly income who is almost the same as your regular net income. Everybody has the same good health care regardless your income. The prices of medicines, hospitals and doctors are regulated by the government. This make health care much more cheaper than the States, and nobody is exclude from the system. Because everybody who work is in the system. They cut it imideatly from your salary and also the company where you are employed have to pay an additional % on your salary. So therefore everybody regardless where he work has the benefits.

When you buy medicines you only have to pay a small part by yourself, the pharmacist collect the rest from national health care.

Also education, retirement, unemployment are part of the social security system.

The redistribution of wealth is meaning that an dishwasher in a restaurant who pay 100$ a month for social security get the same medical care as the CEO of GM who pay maybe 10 000$ a month for his social security.

Please don't narrow a welfare state to food stamps. Its much more than that.

A welfare state is an social protection for the employees regardless their salary. So an low salary earner can give his children a good education and good health care to name only a few.

Also a national health care system is not expensive because its financed by the workers themselves, and not by the government, the government is only the distributor and manager of it.

Also people who lost everything due to the banking crisis and have to sleep in their car is onknown in the EU. And is this not an advantage of an welfare state. Also working poor who must have 2 or 3 jobs without health care to keep ends meet is unknow in the EU.

We are on the opposite sides of the spectrum. I’ll respect your opinion, even though it vastly different than mine.

IMO:

• Why should someone that contributed 10 times the amount into social security get the same benefits? Sure is nice for people to live off social security that people like me paid for. If you are one of the well off that are paying for the less well off to retire comfortably on money they didn’t contribute, then good for you.

Spending what others have contributed sure seems like welfare to me. I prefer a system that rewards financial accomplishments.

• Most individuals that don’t have health care are living in cars have chosen to do so. Making the choice easier would only compound our abused welfare system. As for the unfortunate indiduals that have by no fault of their own are destitute, I feel for them. I don’t THINK more handouts are the answer.

I’ve had many years making hundreds of thousands dollars and I’ve also been unemployed and broke. When I was broke, I didn’t apply for welfare or live in a car. I put my pride aside and supported myself cleaning pools and waiting on tables. Some people are born losers and others choose to be because the alternative is too difficult.

[BEENTHEREDONETHAT]

Something I have been wondering about is the chances of going into deflation. Haven't really heard much about it, but then I'm not very well read on finances.

How about some of you that are better informed giving me your opinion on the prospects of deflation in the not to distant future.

The following is a brief discription by Wikapedia........

Deflation is the opposite of inflation. Therefore, under the usual contemporary definition of inflation, 'deflation' means a decrease in the general price level.^[1] Alternatively, the term was used by the classical economists to refer to a decrease in the money supply and credit; some economists, including many Austrian school economists, still use the word in this sense. The two meanings are closely related, since a decrease in the money supply is likely to cause a decrease in the price level.

Deflation is considered a problem in a modern economy because of the potential of a deflationary spiral and its association with the Great Depression, although not all episodes of deflation correspond to periods of poor economic growth historically

----------------------------------------------------

...it appears to me that a decrease in money supply is what is happening now.

[henryalleman]

I disagree, derivatives are a huge problem but would amount to nothing without foreclosures. EU banks don't have the derivative exposure of US banks and are facing the same issues. I understand derivatives and foreclosures feed off each other, but at this point which evil is worse is hard to grasp.

and i disagree completely with your statement. what you seem to forget is that european (and other) banks were stupid enough to buy the derivatives FROM U.S. banks based on U.S. subprime mortgages. besides that there is no doubt they are facing their own problems concerning financing of real estate.

No, I haven't forgotten the European banks that bought derivatives from the US. Actually I mentioned just that in my original post. IMO, I think European banks biggest issues are extreme leverage and over valued real estate. No really bad news the last few days - maybe the worst if over for banks. Now we will just be stuck in a nasty recession for who knows how long.

Already a few topics you are going on about an extreme leverage and over valued real estate. Its clear to me that you ignorant the Europea

I'm not naïve, just a realist that looks at the numbers. Do the research before making unfounded claims. It's easy – just google leverage EU vs US banks. I'll help you out with one souce below. Don't take my word for it - do your own research.

http://www.nakedcapitalism.com/2008/10/why...precarious.html

As for your belief that EU's extensive welfare system is positive, I think it is a disadvantage. Never needed welfare and would be embarrassed to accept it.

http://www.nakedcapitalism.com/2008/10/why...precarious.html

I you not only read the article, but also the given comments you will realize that the EU banks are in fare more better shape than their US counterparts.

[henryalleman]

"As for your belief that EU's extensive welfare system is positive, I think it is a disadvantage. Never needed welfare and would be embarrassed to accept it."

I think you are a little bit mixed up about welfare. I was not talking about receiving food coupons or things like that.

I was talking about a welfare system what is something completely different.

I was talking about a social security system. Some examples.

When you are seriously sick or have major surgery and can't work for a long time you get a monthly income who is almost the same as your regular net income. Everybody has the same good health care regardless your income. The prices of medicines, hospitals and doctors are regulated by the government. This make health care much more cheaper than the States, and nobody is exclude from the system. Because everybody who work is in the system. They cut it imideatly from your salary and also the company where you are employed have to pay an additional % on your salary. So therefore everybody regardless where he work has the benefits.

When you buy medicines you only have to pay a small part by yourself, the pharmacist collect the rest from national health care.

Also education, retirement, unemployment are part of the social security system.

The redistribution of wealth is meaning that an dishwasher in a restaurant who pay 100$ a month for social security get the same medical care as the CEO of GM who pay maybe 10 000$ a month for his social security.

Please don't narrow a welfare state to food stamps. Its much more than that.

A welfare state is an social protection for the employees regardless their salary. So an low salary earner can give his children a good education and good health care to name only a few.

Also a national health care system is not expensive because its financed by the workers themselves, and not by the government, the government is only the distributor and manager of it.

Also people who lost everything due to the banking crisis and have to sleep in their car is onknown in the EU. And is this not an advantage of an welfare state. Also working poor who must have 2 or 3 jobs without health care to keep ends meet is unknow in the EU.

We are on the opposite sides of the spectrum. I'll respect your opinion, even though it vastly different than mine.

IMO:

• Why should someone that contributed 10 times the amount into social security get the same benefits? Sure is nice for people to live off social security that people like me paid for. If you are one of the well off that are paying for the less well off to retire comfortably on money they didn't contribute, then good for you.

Spending what others have contributed sure seems like welfare to me. I prefer a system that rewards financial accomplishments.

• Most individuals that don't have health care are living in cars have chosen to do so. Making the choice easier would only compound our abused welfare system. As for the unfortunate indiduals that have by no fault of their own are destitute, I feel for them. I don't THINK more handouts are the answer.

I've had many years making hundreds of thousands dollars and I've also been unemployed and broke. When I was broke, I didn't apply for welfare or live in a car. I put my pride aside and supported myself cleaning pools and waiting on tables. Some people are born losers and others choose to be because the alternative is too difficult.

I'm in complete agreement with yours statement that we are on opposite sites of the spectrum.

For US citizens the EU social system is protecting the lazy people, and pure communism.

For EU citizens and politicians the US system is pure horror, even for the most far Right wing political party.

I suggest that after both of us agree that we disagree we better close this subject.

[LaoPo]

...it appears to me that a decrease in money supply is what is happening now.

Yes...it APPEARS to be the case; but it's not, at least not in the US:

From January 2000 to October 22, 2008 the Total Bank Credit of All Commercial Banks exceeded $10 trillion; Compared to mid-2000, total bank credit has doubled from $5 trillion to $10 trillion.

So: what credit crisis ? The point is....WHERE did all that money go if there is such a shortage of cash or in other words: why didn't/don't the banks lend out that money again ?

Right: they're sitting on it, improving their balance sheets.

http://www.thaivisa.com/forum/Global-Corre...74#entry2317374

LaoPo

[VegasVic]

I disagree, derivatives are a huge problem but would amount to nothing without foreclosures. EU banks don't have the derivative exposure of US banks and are facing the same issues. I understand derivatives and foreclosures feed off each other, but at this point which evil is worse is hard to grasp.

and i disagree completely with your statement. what you seem to forget is that european (and other) banks were stupid enough to buy the derivatives FROM U.S. banks based on U.S. subprime mortgages. besides that there is no doubt they are facing their own problems concerning financing of real estate.

No, I haven't forgotten the European banks that bought derivatives from the US. Actually I mentioned just that in my original post. IMO, I think European banks biggest issues are extreme leverage and over valued real estate. No really bad news the last few days - maybe the worst if over for banks. Now we will just be stuck in a nasty recession for who knows how long.

Already a few topics you are going on about an extreme leverage and over valued real estate. Its clear to me that you ignorant the Europea

I'm not naïve, just a realist that looks at the numbers. Do the research before making unfounded claims. It's easy – just google leverage EU vs US banks. I'll help you out with one souce below. Don't take my word for it - do your own research.

http://www.nakedcapitalism.com/2008/10/why...precarious.html

As for your belief that EU's extensive welfare system is positive, I think it is a disadvantage. Never needed welfare and would be embarrassed to accept it.

"As for your belief that EU's extensive welfare system is positive, I think it is a disadvantage. Never needed welfare and would be embarrassed to accept it."

I think you are a little bit mixed up about welfare. I was not talking about receiving food coupons or things like that.

I was talking about a welfare system what is something completely different.

I was talking about a social security system. Some examples.

When you are seriously sick or have major surgery and can't work for a long time you get a monthly income who is almost the same as your regular net income. Everybody has the same good health care regardless your income. The prices of medicines, hospitals and doctors are regulated by the government. This make health care much more cheaper than the States, and nobody is exclude from the system. Because everybody who work is in the system. They cut it imideatly from your salary and also the company where you are employed have to pay an additional % on your salary. So therefore everybody regardless where he work has the benefits.

When you buy medicines you only have to pay a small part by yourself, the pharmacist collect the rest from national health care.

Also education, retirement, unemployment are part of the social security system.

The redistribution of wealth is meaning that an dishwasher in a restaurant who pay 100$ a month for social security get the same medical care as the CEO of GM who pay maybe 10 000$ a month for his social security.

Please don't narrow a welfare state to food stamps. Its much more than that.

A welfare state is an social protection for the employees regardless their salary. So an low salary earner can give his children a good education and good health care to name only a few.

Also a national health care system is not expensive because its financed by the workers themselves, and not by the government, the government is only the distributor and manager of it.

Also people who lost everything due to the banking crisis and have to sleep in their car is onknown in the EU. And is this not an advantage of an welfare state. Also working poor who must have 2 or 3 jobs without health care to keep ends meet is unknow in the EU.

As unemployment continues to rise (and my hunch is we haven't seen anything yet on either side of the pond) those E.U. member nations that are welfare intensive will be under more and more pressure as payment for social services and entitlement programs grow beyond anyones imagination and many countries ability to fund. That coupled with what will undoubedly be a much tougher U.S. trade policy from the Obama administration and the hundreds of billions of Euros already earmarked to help the European banking system will put extreme pressure on European economies and social policies which will likely lead to a multi year recession. Your misconception of people sleeping in cars and having to work 2-3 jobs without healthcare in the U.S. is grossly overexagerated (likely by an exponential factor), it is not entirely your fault though as many of the European news outlets have a built in bias, and some have an extreme built in bias like the BBC. Just for the record I think that a couple of years from now those same Europeans who were cursing Bush and hailing Obama as the messiah, will do a complete 180 degree turn and begin cursing Obama for unfair trade policies in the U.S. We are in a time where free trade should be expanded and yet it is going the other way, I hope that something substantial and meaningful will come out of the Bretton Woods 2 summit, but I am not holding my breath.

[VegasVic]

Something I have been wondering about is the chances of going into deflation. Haven't really heard much about it, but then I'm not very well read on finances.

How about some of you that are better informed giving me your opinion on the prospects of deflation in the not to distant future.

The following is a brief discription by Wikapedia........

Deflation is the opposite of inflation. Therefore, under the usual contemporary definition of inflation, 'deflation' means a decrease in the general price level.^[1] Alternatively, the term was used by the classical economists to refer to a decrease in the money supply and credit; some economists, including many Austrian school economists, still use the word in this sense. The two meanings are closely related, since a decrease in the money supply is likely to cause a decrease in the price level.

Deflation is considered a problem in a modern economy because of the potential of a deflationary spiral and its association with the Great Depression, although not all episodes of deflation correspond to periods of poor economic growth historically

----------------------------------------------------

...it appears to me that a decrease in money supply is what is happening now.

World economies are entering a deflationary period, that does not mean that most economies will see deflation. Most economies around the globe will experience disinflation for an extended period of time, of course there could possibly be a few countries that actually encounter true deflation. The greater problem will be in getting countries to work together to shore up and instill confidence in the international banking system and to encourage free trade. There are record levels of cash on the sidelines currently both in private hands and in mutual funds, hedge funds and private equity firms. This cash needs to be deployed in order for the worlds economies to grow, but first people and institutions alike must regain some degree of confidence in the markets and in the banking system and this could take a while