Cash Saving To Be Wiped Out!

[harrry]

Panic of 1907 1907–1908 12 months

A run on Knickerbocker Trust Company deposits on October 22, 1907 set events in motion that would lead to a severe monetary contraction.

It was a terrible time, carnage in women's loungerie departments the world over.

We don't have panics any more this was the last one. Why not? It seems much more accurate.

And were the newspaper headings saying in true Pataya News fashion. "Ladies nickers down"

[flying]

2 hours after I wrote the above I learned about another serious financial news message.

Dutch ING group (well known for it's promotion in the Formula 1 races) had to announce a loss of € 500/$ 674 Million in the 3rd quarter.

Just got a email from them today

Playing by the rules.

A year ago, no one really saw this coming. Banks failing, the Fed having to step in - it's hard for the average person to grasp. We realize you have questions about where to save your money. You should. You have a right to. This is your future you're protecting. So ask away. We want to help you understand why saving your money at

ING DIRECT is a great choice.

We feel very strongly about making sure you know the facts and we'll do whatever we can to keep you informed. We also want you to know that we take our responsibility to be financially accountable seriously. It's why - even though we're in the mortgage business - we never granted subprime loans. It's why we believe in being a Customer advocate, fighting for what's right for you from Wall Street to Main Street. And it's the reason why - as part of ING - we're considered one of the strongest banks in the world.

Call it a philosophy of doing business.

We're in this for you.

Arkadi Kuhlmann

[pkrv]

The last time I was aware of a western country printing money and lowering interest rates was Germany between WW1 and WW2. All savings were deliberately annihilated (with huge social consequences) to effectively end German debts from WW1.

Will the same happen again in terms of wiping out cash savings – my thoughts are yes it will, but what to do about it?

Personally I think you have misstated what happened in Germany during the early 1920's and completely overlooked the fact that the situations are nothing alike.

TH

Thaihome, Don't ruin pkrv's little U.S. bashing party with the facts now The ironic twist to this thread is that inflation in the U.S. peaked at around 4.5% (anualized) and has been droping the last few months! Actually the dirty little secret being wispered about in the U.S. is deflation, where as in Thialand and China the inflation rates are in the double digits, hence the twist of irony!

There is no bashing here 'VegasVic' - it is simply an historical parallel (admittedly tragic). In the UK we are seeing a divergence in interest rates and inflation - IMO not good news. You guys from the US contribute information from your own perspective great news, but you do not have to be quite so defensive with me

It is possibly important to note that some other US posters have mentioned the US will print its way out of trouble if necessary (deflation) - but I do not follow this stuff.

Edited October 19, 2008 by pkrv

[VegasVic]

The last time I was aware of a western country printing money and lowering interest rates was Germany between WW1 and WW2. All savings were deliberately annihilated (with huge social consequences) to effectively end German debts from WW1.

Will the same happen again in terms of wiping out cash savings – my thoughts are yes it will, but what to do about it?

Personally I think you have misstated what happened in Germany during the early 1920's and completely overlooked the fact that the situations are nothing alike.

TH

Thaihome, Don't ruin pkrv's little U.S. bashing party with the facts now The ironic twist to this thread is that inflation in the U.S. peaked at around 4.5% (anualized) and has been droping the last few months! Actually the dirty little secret being wispered about in the U.S. is deflation, where as in Thialand and China the inflation rates are in the double digits, hence the twist of irony!

There is no bashing here 'VegasVic' - it is simply an historical parallel (admittedly tragic). In the UK we are seeing a divergence in interest rates and inflation - IMO not good news. You guys from the US contribute information from your own perspective great news, but you do not have to be quite so defensive with me

It is possibly important to note that some other US posters have mentioned the US will print its way out of trouble if necessary (deflation) - but I do not follow this stuff.

Let me see if have this right, you start off a thread by comparing Weimar Germany to current day U.S.A. , and then you go on to say that there was no bashing intended that it was just an historic parallel I am not certain if your ignorance about the conditions in Weimar Germany is greater than your ignorance about the current conditions of the United States, but my guess would be that you have no clue as to either In 1914 four German marks would get you one U.S. Dollar, less than ten years later it would take one TRILLION German marks to buy one U.S. Dollar These are the facts my terribly misinformed friend! Here are some more facts for you, over the past few months the pound has weakened from over $2/pound to less than $1.75/pound and the Euro has gone from $1.60/Euro to less than $1.35/ Euro, is that your idea of a weakening Dollar? One final note, when your "print your way out of trouble" as you so deftly put it, you cause inflation not deflation and currently the U.S. could be facing deflation in the coming year. Next time you think about posting a "historic parallel" do a little research to see if any parallel even exists

[AlexLah]

Update on ING.

Bank insurer ING will recieve 10 Billion Euro from the Dutch government.

With the 10 Billion Euro recieved, ING will use it to strenghten it's core capital, whatever that means.

The Dutch governement will recieve securities, which are comparible with shares, is what they say.

ING assured they still have a strong capital position and do not see any problem.

Although they did not rule out any calls for financial help in the future.

For your info, the Dutch government has reserved 20 Billion in total to rescue the banking system.

I just wonder why all this new money has to be pumped in.

Alex

[pkrv]

The last time I was aware of a western country printing money and lowering interest rates was Germany between WW1 and WW2. All savings were deliberately annihilated (with huge social consequences) to effectively end German debts from WW1.

Will the same happen again in terms of wiping out cash savings – my thoughts are yes it will, but what to do about it?

Personally I think you have misstated what happened in Germany during the early 1920's and completely overlooked the fact that the situations are nothing alike.

TH

Thaihome, Don't ruin pkrv's little U.S. bashing party with the facts now The ironic twist to this thread is that inflation in the U.S. peaked at around 4.5% (anualized) and has been droping the last few months! Actually the dirty little secret being wispered about in the U.S. is deflation, where as in Thialand and China the inflation rates are in the double digits, hence the twist of irony!

There is no bashing here 'VegasVic' - it is simply an historical parallel (admittedly tragic). In the UK we are seeing a divergence in interest rates and inflation - IMO not good news. You guys from the US contribute information from your own perspective great news, but you do not have to be quite so defensive with me

It is possibly important to note that some other US posters have mentioned the US will print its way out of trouble if necessary (deflation) - but I do not follow this stuff.

Let me see if have this right, you start off a thread by comparing Weimar Germany to current day U.S.A. , and then you go on to say that there was no bashing intended that it was just an historic parallel I am not certain if your ignorance about the conditions in Weimar Germany is greater than your ignorance about the current conditions of the United States, but my guess would be that you have no clue as to either In 1914 four German marks would get you one U.S. Dollar, less than ten years later it would take one TRILLION German marks to buy one U.S. Dollar These are the facts my terribly misinformed friend! Here are some more facts for you, over the past few months the pound has weakened from over $2/pound to less than $1.75/pound and the Euro has gone from $1.60/Euro to less than $1.35/ Euro, is that your idea of a weakening Dollar? One final note, when your "print your way out of trouble" as you so deftly put it, you cause inflation not deflation and currently the U.S. could be facing deflation in the coming year. Next time you think about posting a "historic parallel" do a little research to see if any parallel even exists

OK Where exactly did I mention the USA? I would however be interested in rates, USA debit and deposit on a standard account and where they are going?

[LaoPo]

Update on ING.

Bank insurer ING will recieve 10 Billion Euro from the Dutch government.

With the 10 Billion Euro recieved, ING will use it to strenghten it's core capital, whatever that means.

The Dutch governement will recieve securities, which are comparible with shares, is what they say.

ING assured they still have a strong capital position and do not see any problem.

Although they did not rule out any calls for financial help in the future.

For your info, the Dutch government has reserved 20 Billion in total to rescue the banking system.

I just wonder why all this new money has to be pumped in.

Alex

It's a bit different.

The government will support ING with € 10 Billion (out of the € 20 Billion they had in reserve so support -healthy- banks; if necessary) in return for:

* securities, priced at € 7.33/share which was last Friday's closing share price of ING; those securities are not part of ING's so-called core capital. Consequently, current ING share capital will not be watered down due to the government support.

* 8,5% interest/year (that's STIFF !)

* the government will appoint two members in ING's managing board and those members will have voting rights in matters concerning all fundamental decisions and investments involving more than 25 percent of ING's equity.

The securities/shares will be resold to ING (for a price to be determined at a later stage) at a moment the crisis is over and there is no more need for the government injection.

One shouldn't forget that ING is a very very large bank and active in banking, insurance and asset management and has, worldwide, more than 75 million customers with € 338 BILLION in saving deposits. It's one of the largest retail banks in the world.

This € 10 Billion injection is just a temporary measure and it's just a small part in comparison to the aid given to some banks in the US and EU like UBS which received some $ 60 Billion (and where wealthy clients withdrew $ 58 Billion in the third quarter...)

LaoPo

[flying]

It's a bit different.

The government will support ING with € 10 Billion (out of the € 20 Billion they had in reserve so support -healthy- banks; if necessary) in return for:

That is a lot more like it should be done IMHO

Not the way our gov (USA) has just handed it out to healthy & unhealthy alike.

[LaoPo]

It's a bit different.

The government will support ING with € 10 Billion (out of the € 20 Billion they had in reserve so support -healthy- banks; if necessary) in return for:

That is a lot more like it should be done IMHO

Not the way our gov (USA) has just handed it out to healthy & unhealthy alike.

You can't compare the US with Holland. There were just 4 major banks in The Netherlands, apart from some very small ones:

ABN AMRO Bank (was -for a part- sold to FORTIS in 2007) now bought by the Dutch Government.

FORTIS Bank - Holland; also bought by the Dutch government (see above); Fortis Belgium is now in French hands.

ING; see news story, above.

RABO Bank; the only triple AAA bank in The Netherlands and in quite healthy shape.

Note: the US government did not hand out yet all of the $ 700 Billion did they ? (apart from the other Bail Outs and supports).

LaoPo

[flying]

You can't compare the US with Holland. There were just 4 major banks in The Netherlands, apart from some very small ones:

ABN AMRO Bank (was -for a part- sold to FORTIS in 2007) now bought by the Dutch Government.

FORTIS Bank - Holland; also bought by the Dutch government (see above); Fortis Belgium is now in French hands.

ING; see news story, above.

RABO Bank; the only triple AAA bank in The Netherlands and in quite healthy shape.

Note: the US government did not hand out yet all of the $ 700 Billion did they ? (apart from the other Bail Outs and supports).

LaoPo

Yes I agree I do not compare the two countries. But I applaud the methodology of how they are dealing with it there.

I also agree 100% with what Anna Schwartz said here

http://jessescrossroadscafe.blogspot.com/

PS:No I do not think they have blown all of the 700B....yet

Edited October 19, 2008 by flying

[LaoPo]

I also agree 100% with what Anna Schwartz said here

http://jessescrossroadscafe.blogspot.com/

I read the article, earlier today. You posted it in another thread, right ?

Very interesting article and a very interesting 92 year old Lady Schwartz as well and basically I also agree with her with the exception of the part where she claims:

"Rather, "firms that made wrong decisions should fail," she says bluntly. "You shouldn't rescue them. And once that's established as a principle, I think the market recognizes that it makes sense. Everything works much better when wrong decisions are punished and good decisions make you rich."

The point is that I agree with her.....BUT...this era is entirely different (then normal cases of bad companies/banks) in a way that IF the US and EU (to limit myself to 2 parts of the world just for now) would NOT have stepped in and rescued, nationalised, bailed out or taken over the Fannie Mae's, Freddie Mac's and all others in the (not up to date) link*** below, the COMPLETE FINANCIAL system in the world would have collapsed.

Mrs. Schwartz, and I admire her views, is probably talking about incidental failures and banks/companies who made bad decisions going under during normal economical circumstances, not the dramatic crisis we are facing and trying to overcome now.

IF....the US and EU would have let those banks and financials go under, drown..... into bankruptcy, we would have witnessed the ultimate APOCALYPSE in the history of mankind.

It would have been a lot worse than the outcome of several wars; most people have no idea how bad it could have been.

Instead of (NOW) a few saved and rescued (mortgage) banks/financials we would have seen a total collapse of thousands of banks, worldwide.

Billions of people and businesses would not have had access to money anymore - NOT A SINGLE DOLLAR or EURO and:.......overnight !

No access to ATM machines, NO internet banking, airlines, airports, harbours, factories, exporters would have stopped completely; oil, gas and electricity deliveries, cars, planes....everything stops without banks and financials working properly.

What we are watching now is a serious crisis which will become worse, still !; we are watching gigantic world wide financial machines trying to function and roll on without proper mechanical maintenance and not enough "oil" and it's still very difficult but the world will overcome, in the end, but the price will be very high for many many people.

But, the scenario Mrs. Schwartz describes: "let all firms (banks/financials) that made wrong decisions, fail" is not an option.

IF our governments would NOT have made the steps as they did (and are taking) now, we would....you name it...

http://news.bbc.co.uk/2/hi/business/7644238.stm

LaoPo

[flying]

I read the article, earlier today. You posted it in another thread, right ?

Very interesting article and a very interesting 92 year old Lady Schwartz as well and basically I also agree with her with the exception of the part where she claims:

"Rather, "firms that made wrong decisions should fail," she says bluntly. "You shouldn't rescue them. And once that's established as a principle, I think the market recognizes that it makes sense. Everything works much better when wrong decisions are punished and good decisions make you rich."

The point is that I agree with her.....BUT...this era is entirely different (then normal cases of bad companies/banks) in a way that IF the US and EU (to limit myself to 2 parts of the world just for now) would NOT have stepped in and rescued, nationalised, bailed out or taken over the Fannie Mae's, Freddie Mac's and all others in the (not up to date) link*** below, the COMPLETE FINANCIAL system in the world would have collapsed.

Mrs. Schwartz, and I admire her views, is probably talking about incidental failures and banks/companies who made bad decisions going under during normal economical circumstances, not the dramatic crisis we are facing and trying to overcome now.

IF....the US and EU would have let those banks and financials go under, drown..... into bankruptcy, we would have witnessed the ultimate APOCALYPSE in the history of mankind.

It would have been a lot worse than the outcome of several wars; most people have no idea how bad it could have been.

Instead of (NOW) a few saved and rescued (mortgage) banks/financials we would have seen a total collapse of thousands of banks, worldwide.

Billions of people and businesses would not have had access to money anymore - NOT A SINGLE DOLLAR or EURO and:.......overnight !

No access to ATM machines, NO internet banking, airlines, airports, harbours, factories, exporters would have stopped completely; oil, gas and electricity deliveries, cars, planes....everything stops without banks and financials working properly.

What we are watching now is a serious crisis which will become worse, still !; we are watching gigantic world wide financial machines trying to function and roll on without proper mechanical maintenance and not enough "oil" and it's still very difficult but the world will overcome, in the end, but the price will be very high for many many people.

But, the scenario Mrs. Schwartz describes: "let all firms (banks/financials) that made wrong decisions, fail" is not an option.

IF our governments would NOT have made the steps as they did (and are taking) now, we would....you name it...

http://news.bbc.co.uk/2/hi/business/7644238.stm

LaoPo

Yes I posted the link in another post.

I see what your saying but find it impossible for anyone to know with certainty that the outcome would have been what you describe.

By the same token none can say for certain what this *rescue* will result in.

Personally I think someday we ( The USA citizens ) will look back on the rescue of Fannie & Freddie as the beginning of the end.

But, the scenario Mrs. Schwartz describes: "let all firms (banks/financials) that made wrong decisions, fail" is not an option.

I believe it was & is an option. I believe there is more healthy banks than they let on. I also believe they are understating the problem at the infected banks.

Billions of people and businesses would not have had access to money anymore - NOT A SINGLE DOLLAR or EURO and:.......overnight !

Again I disagree & think that is the fear they fed.

In any case we will see where this path they took will take us.

[LaoPo]

Yes I posted the link in another post.

I see what your saying but find it impossible for anyone to know with certainty that the outcome would have been what you describe.

By the same token none can say for certain what this *rescue* will result in.

Personally I think someday we ( The USA citizens ) will look back on the rescue of Fannie & Freddie as the beginning of the end.

But, the scenario Mrs. Schwartz describes: "let all firms (banks/financials) that made wrong decisions, fail" is not an option.

I believe it was & is an option. I believe there is more healthy banks than they let on. I also believe they are understating the problem at the infected banks.

Billions of people and businesses would not have had access to money anymore - NOT A SINGLE DOLLAR or EURO and:.......overnight !

Again I disagree & think that is the fear they fed.

In any case we will see where this path they took will take us.

You're optimistic and that's nice but what just happened in the past few months is a mere drop in the ocean if those banks -now saved- would have collapsed. The domino effect would have been disastrous and thousands of banks would have faced a run on them by millions all over the world, withdrawing their money.

Did you know that there are more than 8,000 (smaller) banks in the US alone (I didn't until recently) ? How, do you think the clients of those banks would react ? Any idea ?

The point you mentioned that you believe there are more healthy banks is because we don't know IF they are -still- healthy, if they don't have an infection or virus in their balance sheets......

YOU believe so, but sorry, YOUR believe is not enough for me and not enough for the banks out there who do NOT believe and trust their counterpart Banks in the banking industry anymore....not in their local country, nor abroad.

IF those banks -you mentioned- would be so healthy, we wouldn't have the credit crisis now, on top of the subprime and toxic banking product crisis.

Tell me Flying: what will the government do if a Giant like GM goes under...? (which is quite possible !)

Send the 260,000 workers home....send the millions of workers in GM's supplying industries home ? .....OR try to save the company instead of having them fed (social security) by DC ?

What do you think...? what is cheaper ?

Mrs. Schwartz's opinion of letting ALL firms go under if they made bad decisions is a very good idea and basically I agree with that; but NOT in these circumstances where the governments have to make a choice....a bad one, between even more bad choices.

LaoPo

[flying]

You're optimistic and that's nice but what just happened in the past few months is a mere drop in the ocean if those banks -now saved- would have collapsed. The domino effect would have been disastrous and thousands of banks would have faced a run on them by millions all over the world, withdrawing their money.

Did you know that there are more than 8,000 (smaller) banks in the US alone (I didn't until recently) ? How, do you think the clients of those banks would react ? Any idea ?

The point you mentioned that you believe there are more healthy banks is because we don't know IF they are -still- healthy, if they don't have an infection or virus in their balance sheets......

YOU believe so, but sorry, YOUR believe is not enough for me and not enough for the banks out there who do NOT believe and trust their counterpart Banks in the banking industry anymore....not in their local country, nor abroad.

IF those banks -you mentioned- would be so healthy, we wouldn't have the credit crisis now, on top of the subprime and toxic banking product crisis.

Tell me Flying: what will the government do if a Giant like GM goes under...? (which is quite possible !)

Send the 260,000 workers home....send the millions of workers in GM's supplying industries home ? .....OR try to save the company instead of having them fed (social security) by DC ?

What do you think...? what is cheaper ?

Mrs. Schwartz's opinion of letting ALL firms go under if they made bad decisions is a very good idea and basically I agree with that; but NOT in these circumstances where the governments have to make a choice....a bad one, between even more bad choices.

LaoPo

Thanks & yes we will have to disagree.

Also yes it is my belief but I am here & this is what I see.

Here in the US where I am they still seem fine as far as local banks & credit unions go. They are still lending for business & for home building.

Perhaps this States banks were not as involved as those mentioned before.

But lets look at the Facts that we know now.

Which banks / institutions actually came forward?

Mainly the ones on your link. I know your link is not up to date but it agrees with what we have seen here on the news & the internet.

<h2 class="data466">BANKS AFFECTED BY THE GLOBAL CRISIS - 2008</h2> Giants of the business world, such as Lehman Brothers and Merrill Lynch, have crumbled or been bought out.

Bank Date Status

Fannie Mae 07 Sep Nationalised

Freddie Mac 07 Sep Nationalised

Lehman Bros 15 Sep Collapsed

Merrill Lynch 15 Sep Taken over

AIG 16 Sep Part-nationalised

HBOS 17 Sep Taken over

WaMu 25 Sep Collapsed and sold

Fortis 28 Sep Nationalised

Bradford & Bingley 29 Sep Nationalised

Wachovia 29 Sep Taken over

Glitnir 29 Sep Nationalised

Hypo Real Estate 06 Oct Rescue package

RBS 13 Oct Part-nationalised

Lloyds TSB 13 Oct Part-nationalised

So we look at these above...............Pick out the USA based ones...........

Fannie & Freddie, Lehman, Merrill Lynch, AIG ,WAMU & Wachovia

It appears being taken over or collapsing was an option. That option did not result in the collapse of the world financial system. Both being taken over by stronger operations & collapsing is the way of the business world. The Govt should leave it at that.

Like Ms. Schwartz said it is not a liquidity problem. Which is why this govt intervention will not work ultimately. It has only made the bad banks worse IMHO

It has not freed up bank top bank lending has it?

But I wonder if later in hind sight we will say sorry for infecting the *clean* banks with the bill for this toxic debts?

Edited October 20, 2008 by flying

[cloudhopper]

The last time I was aware of a western country printing money and lowering interest rates was Germany between WW1 and WW2. All savings were deliberately annihilated (with huge social consequences) to effectively end German debts from WW1.

Will the same happen again in terms of wiping out cash savings – my thoughts are yes it will, but what to do about it?

My understanding of what I've been reading is that cash savings may not do too badly, at least if prudently positioned. Credit and money are contracting massively and at a faster rate than can be "printed". Whatever can be sold to get more, of the right currency, is being sold. Unemployment, foreclosures on "good" loans of all types, credit card defaults etc. will increase and prices in general (and the stock market) along with capital investment will decrease. Hopefully the Western governments have enough of a socioeconomic safety net to prevent a spiralling depression. Anyway, it seems that at least for the near term, those who have a safe job or other income, no debt and cash savings will do OK.

[JaiDamJungLoei]

Back to the OP for a moment.

The real misunderstanding is thinking that governments create money. They do, but only a small percentage, and generally by borrowing it. They increase the money supply by increasing the national debt. This is one area where EU countries are far ahead of the US. Check their national debt to GDP ratio, all are much higher than the US. But, right now the US is working hard to catch up.

Here's a good primer on where money really comes from:

http://video.google.com/videoplay?docid=-9050474362583451279

However, the second part of the video is about how economies could be stabilized. What the people that created the video don't realize is that banks, hedge funds, mutual funds, etc, don't want a stable economy. A stable economy is a boring low profit economy. An unstable economy is an exciting, high profit potential economy. When the big money people bet wrong and take it in the shorts, why they can just go to the governments and get bailed out "for the good of the economy".

The real cure for the credit fiasco currently underway would be for the governments to declare all the credit derivatives as bad debt, do a debt to equity swap at the banks, and make the people who own the credit derivatives write them all off as a loss ( I know it's a bit more involved than that, but you get the picture). Most of the losses would then be born by the people who created this mess. But this would cause a lot of big money financial organizations to loose money, which they want to avoid by lobbying governments to give money to the banks (and AIG), so they can pay off their debts and save the profits of the big money financial organizations.

Remember, all the sub prime bad debt in the US totals about $250 Billion, and about 80% of this will eventually be paid of by the borrowers. How does this roll up into an estimated $62 Trillion in world wide credit derivative debt? That's the real story of uncontrolled greed that's still playing out.

LaoPo - your posts are write on.

[Pakboong]

Debt as a percentage of GDP is now 356% versus 260% prior to the Crash of 1929. (US)

http://www.silverbearcafe.com/private/10.08/storm.html

[pkrv]

Back to the OP for a moment.

The real misunderstanding is thinking that governments create money. They do, but only a small percentage, and generally by borrowing it. They increase the money supply by increasing the national debt. This is one area where EU countries are far ahead of the US. Check their national debt to GDP ratio, all are much higher than the US. But, right now the US is working hard to catch up.

Here's a good primer on where money really comes from:

http://video.google.com/videoplay?docid=-9050474362583451279

However, the second part of the video is about how economies could be stabilized. What the people that created the video don't realize is that banks, hedge funds, mutual funds, etc, don't want a stable economy. A stable economy is a boring low profit economy. An unstable economy is an exciting, high profit potential economy. When the big money people bet wrong and take it in the shorts, why they can just go to the governments and get bailed out "for the good of the economy".

The real cure for the credit fiasco currently underway would be for the governments to declare all the credit derivatives as bad debt, do a debt to equity swap at the banks, and make the people who own the credit derivatives write them all off as a loss ( I know it's a bit more involved than that, but you get the picture). Most of the losses would then be born by the people who created this mess. But this would cause a lot of big money financial organizations to loose money, which they want to avoid by lobbying governments to give money to the banks (and AIG), so they can pay off their debts and save the profits of the big money financial organizations.

Remember, all the sub prime bad debt in the US totals about $250 Billion, and about 80% of this will eventually be paid of by the borrowers. How does this roll up into an estimated $62 Trillion in world wide credit derivative debt? That's the real story of uncontrolled greed that's still playing out.

LaoPo - your posts are write on.

'JaiDamJungLoei' - thanks very much for that link, it was really really educational! One thing that didn't come out particularly is human behaviour. As we grow older we tend not to take on more debt and release ourselves from old debts. In a system that needs to create debt to create money an aging population is the beginning of the end! But perhaps that is the true meaning of why there is the subprime market.

Anyone else watched this?

[AlexLah]

Hi all,

I would like to thank you all for contributing to this very informative thread.

One thing I do not understand.

ING is saying they do not have any financial problems.

So why do they need a 10 Billion Euro capital injection?

I just do not get it.

Can someone please explain it in simple words?

[cocopops]

The last time I was aware of a western country printing money and lowering interest rates was Germany between WW1 and WW2. All savings were deliberately annihilated (with huge social consequences) to effectively end German debts from WW1.

Will the same happen again in terms of wiping out cash savings – my thoughts are yes it will, but what to do about it?

My understanding of what I've been reading is that cash savings may not do too badly, at least if prudently positioned. Credit and money are contracting massively and at a faster rate than can be "printed". Whatever can be sold to get more, of the right currency, is being sold. Unemployment, foreclosures on "good" loans of all types, credit card defaults etc. will increase and prices in general (and the stock market) along with capital investment will decrease. Hopefully the Western governments have enough of a socioeconomic safety net to prevent a spiralling depression. Anyway, it seems that at least for the near term, those who have a safe job or other income, no debt and cash savings will do OK.

This guy gets it. Right now you want cash. USD or US government debt. Every thing else is well fuc_ked until all this deleveraging is over and done with.

[pkrv]

The last time I was aware of a western country printing money and lowering interest rates was Germany between WW1 and WW2. All savings were deliberately annihilated (with huge social consequences) to effectively end German debts from WW1.

Will the same happen again in terms of wiping out cash savings – my thoughts are yes it will, but what to do about it?

My understanding of what I've been reading is that cash savings may not do too badly, at least if prudently positioned. Credit and money are contracting massively and at a faster rate than can be "printed". Whatever can be sold to get more, of the right currency, is being sold. Unemployment, foreclosures on "good" loans of all types, credit card defaults etc. will increase and prices in general (and the stock market) along with capital investment will decrease. Hopefully the Western governments have enough of a socioeconomic safety net to prevent a spiralling depression. Anyway, it seems that at least for the near term, those who have a safe job or other income, no debt and cash savings will do OK.

This guy gets it. Right now you want cash. USD or US government debt. Every thing else is well fuc_ked until all this deleveraging is over and done with.

Ohh I agree - I am only in cash and property (my two homes not investments). But the funny thing is this seems to also be causing the problem!

no one has yet flamed JaiDamJungLoei's link

http://video.google.com/videoplay?docid=-9050474362583451279

And it explains ALOT! No loans - no money!

This comedy sketch link courtesy of Churchill now makes much more sense - and it is so funny!

http://www.brasschecktv.com/page/187.html

Edited October 20, 2008 by pkrv

[BEENTHEREDONETHAT]

Debt as a percentage of GDP is now 356% versus 260% prior to the Crash of 1929. (US)

http://www.silverbearcafe.com/private/10.08/storm.html

Pakboong

Very informative but somewhat depressing article.

Thanks for that

[lannarebirth]

The NWO tax man cometh:

EU Leaders Call for Global Currency

Kurt Nimmo

Infowars

Saturday, Oct 18, 2008

If we are to believe the Washington Post, French president and current EU leader Nicolas Sarkozy has pledged to save us from nameless “freewheeling bankers and traders” who get the blame for the current economic crisis.

Sarkozy, Gordon Brown, and EU honcho José Manuel Barroso are talking up an international summit to discuss an “urgent overhaul of the world’s financial architecture,” that is to say a new Bretton Woods to establish a brand spanking new international economic order. Sarkozy has managed to grab George Bush’s ear and he will travel to Washington on Saturday to lay the groundwork for a conference.

In 1944, 44 allied nations met at a resort in Bretton Woods, New Hampshire, to fiddle with monetary standards, fix exchange rates, and create the IMF and World Bank. “Launching a remake of this old model — particularly in such a short time, with so many new participants — would represent a daunting challenge at any time, but particularly during the twilight of the Bush presidency and the crisis that is still jolting banks and stock markets around the world,” reports the Post.

(Article continues below)

Sarkozy and the EU leaders would have us believe this new Bretton Woods will call for “globally coordinated regulation of the financial industry, elimination of tax havens and a compensation system in which traders are not rewarded for dangerous risk-taking,” among other things.

It was the demise of Bretton Woods in 1971, insists European Central Bank president Jean- Claude Trichet, that led to the abandonment of regulation and subsequent market turmoil. “The explosion of the first Bretton Woods in a way could be interpreted as a rejection of discipline,” said Trichet, reports Bloomberg.

Gordon Brown, the former Chancellor of the Exchequer, wants to fix that turmoil with a new spate of regulations aimed at international finance. On October 13 in London, Brown said “we must devise new rules for a world of global capital flows” just as the founders of Bretton Woods “devised rules for a world of limited capital flows.”

[LaoPo]

ING is saying they do not have any financial problems.

So why do they need a 10 Billion Euro capital injection?

I just do not get it.

Can someone please explain it in simple words?

Go to fd.nl and you will find your (maybe not so simple) explanation(s).

LaoPo

[LaoPo]

You're optimistic and that's nice but what just happened in the past few months is a mere drop in the ocean if those banks -now saved- would have collapsed. The domino effect would have been disastrous and thousands of banks would have faced a run on them by millions all over the world, withdrawing their money.

Did you know that there are more than 8,000 (smaller) banks in the US alone (I didn't until recently) ? How, do you think the clients of those banks would react ? Any idea ?

The point you mentioned that you believe there are more healthy banks is because we don't know IF they are -still- healthy, if they don't have an infection or virus in their balance sheets......

YOU believe so, but sorry, YOUR believe is not enough for me and not enough for the banks out there who do NOT believe and trust their counterpart Banks in the banking industry anymore....not in their local country, nor abroad.

IF those banks -you mentioned- would be so healthy, we wouldn't have the credit crisis now, on top of the subprime and toxic banking product crisis.

Tell me Flying: what will the government do if a Giant like GM goes under...? (which is quite possible !)

Send the 260,000 workers home....send the millions of workers in GM's supplying industries home ? .....OR try to save the company instead of having them fed (social security) by DC ?

What do you think...? what is cheaper ?

Mrs. Schwartz's opinion of letting ALL firms go under if they made bad decisions is a very good idea and basically I agree with that; but NOT in these circumstances where the governments have to make a choice....a bad one, between even more bad choices.

LaoPo

Thanks & yes we will have to disagree.

Also yes it is my belief but I am here & this is what I see.

Here in the US where I am they still seem fine as far as local banks & credit unions go. They are still lending for business & for home building.

Perhaps this States banks were not as involved as those mentioned before.

It appears being taken over or collapsing was an option. That option did not result in the collapse of the world financial system. Both being taken over by stronger operations & collapsing is the way of the business world. The Govt should leave it at that.

Like Ms. Schwartz said it is not a liquidity problem. Which is why this govt intervention will not work ultimately. It has only made the bad banks worse IMHO

It has not freed up bank top bank lending has it?

But I wonder if later in hind sight we will say sorry for infecting the *clean* banks with the bill for this toxic debts?

1. you didn't answer several of my questions.

2. you claim: "Here in the US where I am they still seem fine as far as local banks & credit unions go. They are still lending for business & for home building.".

Does that count for the entire country ? And, IF they are still lending, what are the criteria for granting loans ? Nothing as changed ?

3. Basically you don't agree what the US and EU governments have done: saving banks and financials, is that correct ?

Would you also agree if you had $ 5 Million in one of the collapsed banks and lost your money ?

4. AGAIN: I agree with Mrs Schwartz's opinion that firms who made bad decisions should (be allowed to) fail; but NOT in the present circumstances and not ALL firms, like she said.

Indeed, we disagree but before I end my post I would like to draw your attention to just one example:

ING, the second largest savings bank in the world with 75 million clients, worldwide, was injected this weekend with € 10 Billion ($13,4 Billion).

ING was and still is a very healthy bank; just the core capital was increased.

BUT: what would have happened if such a bank, with 130,000 employees, would have collapsed and the government would have let it go and fail ?

What would 75 million -around the globe- clients have done ?

What would hundreds of millions of clients of other banks have done ?

A. Multiply one collapsed MAJOR bank with a factor of 10, 20, 30 or 40 and;

B. Spread those collapsing banks around the world to dozens of countries in: Europe, Russia, Middle East, Japan, China, Sidney, Jakarta, Mumbai, Bangkok......

C. leaving hundreds of millions of people without their savings and money, completely devastated; hundreds of thousands of businesses collapse, overnight....

...........and, Voila !... you have your worldwide -financial & economical- total Apocalypse; a total and complete nightmare.

Still disagree and let ALL firms collapse and do nothing, including losing your (imagined) $ 5 million (or 10K or 100K) in savings ?

LaoPo

[shochu]

you guys are focusing too much on the specifics - but missing the larger picture.

as some have already stated - the entire economy is built on debt. the expansion of debt equals the expansion of money in the system and in order for a capitalist system to function - there must be a continual growth of debt. and as someone mentioned - the populations of the developed western nations are shrinking and importantly - they are in a replacement mode for goods - which equals - NOW.

these collapses are an easy way for the reneging of obligations and if anyone has ever been in a position of hiring/firing - well this makes it bloody easy and they get no compensation as they carry their boxes out.

as i stated a couple of years ago - this is the equalizing where most western countries will have to come down much more than developing countries will move up. kiss your pensions good bye.

by the way someone said - hey ain't buffet smart and he is putting his money into the market. well what he is not making public is that he has taken his money out of bonds.

i do believe the smaller banks have no problems because they were acting like banks should unlike the larger ones that were not. wamu was a deliberate act upon a sound bank.

the reason the us dollar is moving up is because everyone needs to pay their obligations in dollars as have many funds who have had to unwind their gold positions. try locating gold for purchase if you can.

there are some interesting developments taking place for those that are aware and when these events play out - you better hope you are in.

Edited October 20, 2008 by shochu

[LaoPo]

by the way someone said - hey ain't buffet smart and he is putting his money into the market. well what he is not making public is that he has taken his money out of bonds

He DID make it public he's stepping away from Bonds:

"So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds."

...and what's more, he wrote that himself, published 4 days ago in the New York Times:

http://www.nytimes.com/2008/10/17/opinion/...amp;oref=slogin

Your other remark: "i do believe the smaller banks have no problems because they were acting like banks should unlike the larger ones that were not." is something you can't prove because it's simply impossible for you or anybody else to draw conclusions about thousands of small banks in the US since you don't have access to their balance sheets...or do you ?

So, it's just wishful thinking but nothing wrong with that of course apart from the fact it's not realistic.

If the very large banks have been hiding their bad debts....what about the smaller ones ?

LaoPo

[Captain Ron]

GOLD is the currency of last resort. it is the ultimate safe haven. In the Weimar situation Germany 1923 gold was the only way people could preserve their wealth. If you want to hold currencies then swiss franc, chinese Yuan or maybe Singapore dollars(not sure about the SGD). Once the current deleveraging ends gold will soar and cash will be trash.

good luck to you.

BTW check out the Iceland situation. If the govt. or people held gold they wouldn't be in their current predicament.

[LaoPo]

GOLD is the currency of last resort. it is the ultimate safe haven. In the Weimar situation Germany 1923 gold was the only way people could preserve their wealth. If you want to hold currencies then swiss franc, chinese Yuan or maybe Singapore dollars(not sure about the SGD). Once the current deleveraging ends gold will soar and cash will be trash.

good luck to you.

BTW check out the Iceland situation. If the govt. or people held gold they wouldn't be in their current predicament.

Dream on Captain....

people seem to forget what happened since 1923...

In 1923 the world population was less then 2 Billion.

85 years later we have 6,7 Billion people (estimated Oct 2008) walking around the same good old globe.

Next to that the amount of gold, available, will never be enough to satisfy the demand if it would replace currencies.

Dream on about Utopia.

LaoPo

[flying]

You're optimistic and that's nice but what just happened in the past few months is a mere drop in the ocean if those banks -now saved- would have collapsed. The domino effect would have been disastrous and thousands of banks would have faced a run on them by millions all over the world, withdrawing their money.

Did you know that there are more than 8,000 (smaller) banks in the US alone (I didn't until recently) ? How, do you think the clients of those banks would react ? Any idea ?

The point you mentioned that you believe there are more healthy banks is because we don't know IF they are -still- healthy, if they don't have an infection or virus in their balance sheets......

YOU believe so, but sorry, YOUR believe is not enough for me and not enough for the banks out there who do NOT believe and trust their counterpart Banks in the banking industry anymore....not in their local country, nor abroad.

IF those banks -you mentioned- would be so healthy, we wouldn't have the credit crisis now, on top of the subprime and toxic banking product crisis.

Tell me Flying: what will the government do if a Giant like GM goes under...? (which is quite possible !)

Send the 260,000 workers home....send the millions of workers in GM's supplying industries home ? .....OR try to save the company instead of having them fed (social security) by DC ?

What do you think...? what is cheaper ?

Mrs. Schwartz's opinion of letting ALL firms go under if they made bad decisions is a very good idea and basically I agree with that; but NOT in these circumstances where the governments have to make a choice....a bad one, between even more bad choices.

LaoPo

Thanks & yes we will have to disagree.

Also yes it is my belief but I am here & this is what I see.

Here in the US where I am they still seem fine as far as local banks & credit unions go. They are still lending for business & for home building.

Perhaps this States banks were not as involved as those mentioned before.

It appears being taken over or collapsing was an option. That option did not result in the collapse of the world financial system. Both being taken over by stronger operations & collapsing is the way of the business world. The Govt should leave it at that.

Like Ms. Schwartz said it is not a liquidity problem. Which is why this govt intervention will not work ultimately. It has only made the bad banks worse IMHO

It has not freed up bank top bank lending has it?

But I wonder if later in hind sight we will say sorry for infecting the *clean* banks with the bill for this toxic debts?

1. you didn't answer several of my questions.

2. you claim: "Here in the US where I am they still seem fine as far as local banks & credit unions go. They are still lending for business & for home building.".

Does that count for the entire country ? And, IF they are still lending, what are the criteria for granting loans ? Nothing as changed ?

3. Basically you don't agree what the US and EU governments have done: saving banks and financials, is that correct ?

Would you also agree if you had $ 5 Million in one of the collapsed banks and lost your money ?

4. AGAIN: I agree with Mrs Schwartz's opinion that firms who made bad decisions should (be allowed to) fail; but NOT in the present circumstances and not ALL firms, like she said.

Indeed, we disagree but before I end my post I would like to draw your attention to just one example:

ING, the second largest savings bank in the world with 75 million clients, worldwide, was injected this weekend with € 10 Billion ($13,4 Billion).

ING was and still is a very healthy bank; just the core capital was increased.

BUT: what would have happened if such a bank, with 130,000 employees, would have collapsed and the government would have let it go and fail ?

What would 75 million -around the globe- clients have done ?

What would hundreds of millions of clients of other banks have done ?

A. Multiply one collapsed MAJOR bank with a factor of 10, 20, 30 or 40 and;

B. Spread those collapsing banks around the world to dozens of countries in: Europe, Russia, Middle East, Japan, China, Sidney, Jakarta, Mumbai, Bangkok......

C. leaving hundreds of millions of people without their savings and money, completely devastated; hundreds of thousands of businesses collapse, overnight....

...........and, Voila !... you have your worldwide -financial & economical- total Apocalypse; a total and complete nightmare.

Still disagree and let ALL firms collapse and do nothing, including losing your (imagined) $ 5 million (or 10K or 100K) in savings ?

LaoPo

Good Morning LaoPo

Sorry if I did not answer all of your questions. At times I just skim through these threads.

Originally I responded ( I think ) to your post about ING saying it was in my mind a more proper way to rescue a bank. I did not agree our way ( USA ) was smart long term.

Let me try here to answer yours you numbered above.

2) No it does not count for the entire country. Like I said above *Here*

In these crazy days I believe it is best to speak of what I *Know* first hand. Not what I hear. The criteria here is pretty business like. loans for equity is 85% of value if you qualify. Need tax returns for 2 years to show your income etc.

3) again like I said before I do not agree with how We ( The USA) have gone about saving banks with a blanket. I did say I thought the way the Dutch worked *with* ING was a better more business like way.

I also said I did have half of my cash in ING & had just pulled it out. But I did pull it out. As for your question about 5 million? Well if I had it I would not have had it in a account that protected 100k of it & not the other 4.9 million.

So I cannot say as I would not be that stupid.

4)I agree with Schwartz period.

PS: If ING failed it failed ...same goes for GM while I do not think they would or will fail. If GM failed yes those workers go elsewhere & so do the subcontractors.

If we tried to keep the whole world on life support there would be no room for the newborns.

Harsh? I guess but thats business.

Edited October 20, 2008 by flying