Posts tagged GFC
IMF reports on the roots of the world recession: credit
Read on Mother Jones :
“In other words:
It’s not: Financial crisis —-> recession
It is: Recession + leverage —-> financial crisis”
http://m.motherjones.com/kevin-drum/2012/07/great-recession-all-about-leverage-leverage-leverage
Exclusive video: Tim Geithner discusses a strange series of Bank collapses with Hank Paulson (dated end 2008)
Back in 2008 a strange series of bank collapses sends tremors across Wall Street.
- In March 2008 Bear Stearns is in free fall.
- On 7 Sept the US government swiftly moves to push mortgage giants Fannie Mae and Freddie Mac into conservatorship.
- On 12-14 Sept Lehman Brothers nears collapse.
- On 15 September 2008, the firm filed for Chapter 11 bankruptcy protection.
- On 16 Sept the government creates a credit facility of US$85 billion to American International Group AIG so that it can avoid filing bankruptcy.
The situation is rapidly turning into a total clusterfuck when on 15-16 Sept markets crash and credit freezes….
.. forcing the US government to ask for $700 Billion on 18 Sept.
On 13 Oct the top 9 Bankers are summoned to Washington by Treasury Secretary Henry “Hank” Paulson. He tells them that they would be forced to accept government bailout money, whether they wanted it or not: ”If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance.”
Here is an exclusive record that Hollywood has tried to cover-up pretending it was a movie cut. We don’t buy into this conspiracy theory and know all too well that this is a very important piece of intelligence about what really happened in 2008.
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Joseph Stiglitz: Do not Trust Politicians to End the Laissez-Faire
The Crisis of the Flagship of the Liberal Ideology: Is the American Dream Over?
In a recent speech in Paris, while touring Europe to promote his latest book, Joseph Stiglitz sized the magnitude of the crisis with several figures, which reveal important patterns:
- First, the financial support provided by the US governement to AIG was of $180 billion, which is the amount of its financial support to Africa in the last 25 years. Which means that there must have been something really wrong with AIG to add so much to the federal debt. Which raises a fundamental question of Governance, appreciation of Risk, etc..
- Then, the average revenu of the US middle class dropped by 4% from 2000 to 2008. Which means that the tagline “The money has moved from salary to RoE” has become increasingly true. The economy has been increasingly “financialised“:the money has moved from ‘the real economy’ (productive assets, wages, etc) towards ‘speculative markets’
- Finally, a quarter of working Americans cannot find a full-time job. This third pattern is about the social foundation of the economy… This is the thermometer measuring the health of the american dream, which has had better days.
Inflation, Restructuring Debt, Laissez-Faire: What Would Your Elected Politicians Decide?
Stiglitz foresees three possible ways out of the financial turnmoil: inflation, debt restructuring, laissez-faire.
- Inflation is strongly rejected by creditor countries because it would decrease their revenues. Besides, politicians, Obama is particular, are so involved with the financial sector (just look at how many political staffers have close connections with finance and banking in most of the governments) that they cannot decide to fight against their homeland.
- Similarly, restructuring the debt would acknowledge that the financial sector failed and could severely damage the liberal ideology. Not a chance.
- Finally, the only possible way for politicans might be to decide to (almost) do nothing (laissez-faire) as Japan did in the last decades. Looking back at the ‘lost decade’ - 90s - in Japan, the end of the crisis might be quite far from today.
{ NKN }
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