Economics business.The Sub-prime Crisis. How bad is it?

[Michaelangelica]

People here are getting very nervous with banks putting up interest rates (0.2%)without any Reserve bank prompting. (Almost unheard of).

Australian banks under pressure over US subprime exposure
6 hours ago
SYDNEY (AFP) — Shares in Australia's top banks came under pressure on Thursday after a report put their exposure to the US subprime crisis at one billion dollars (884 million US).
. . .
The newspaper said that the four banks were part of a global syndicate of 40 banks that lent troubled US mortgage group Countrywide Financial 11.5 billion US dollars last year.

AFP: Australian banks under pressure over US subprime exposure

Sub-prime drama sparks a bank war
John Durie | January 10, 2008

THE sub-prime crisis has ignited open warfare among the big Australian banks for the first time since former CBA boss David Murray went on the warpath 14 years ago, chasing market share.

Now, his successor Ralph Norris is carrying the same torch. The fact that, in the past week, Australian banks have increased lending rates outside a normal Reserve Bank cycle shows the wheel has turned against the sector.
The banks are only making up some of the shortfall from increased funding costs by increasing lending rates and, in the process, are trying to grab market share to help minimise the costs further.

But, even though the latest Australian economic news looks good, the big bear coming out of the closet is not just shrinking margins but an inevitable increase in bad loan reserves, now that everyone has remembered risk comes at a price. Norris is about to launch a major new brand campaign, and his job has been made so much easier by ANZ's government relations bungle over its 20 basis point hike on variable home mortgage rates.

Sub-prime drama sparks a bank war | The Australian

Banks, UN warn of impending recession

Posted Thu Jan 10, 2008 7:37am AEDT

Another big investment company in the US is warning of an impending recession in the American economy, while the United Nations (UN) has warned US economic problems could trigger a world recession.

Goldman Sachs says the American housing and credit woes suggest the US economy "is falling into recession".

In a research note to. . .

Banks, UN warn of impending recession - ABC News (Australian Broadcasting Corporation)

SoI guess there is not much chance of *itybank dropping my credit card interest rate from 19.65%?

It would be great, would it not, to be in a business where you could not only increase your prices overnight but also the price of everything you have sold over the last 20 years? The banks have it made.

*Sh + tt or merde in French

[LaurieAG]

Originally Posted by Michaelangelica

The banks have it made.

*Sh + tt or merde in French

Hi Michaelangelica,

I heard on the radio the other day that the global financial system doesn't really relate that much to the global economic system. But then what do you call the worlds biggest gambling establishment, that won't close down tables during big runs? (Brave or foolhardy)

So the masters of the perpetually expanding (financial) universe are starting to disappear down a black hole of their own making. Dubious foundations for a financial system let alone a basis for true science.

[Michaelangelica]

Yes larie, dubious indeed

Wall Street started the day with Merrill Lynch reporting that it lost $9.8 billion in the fourth quarter, mainly because of booking $15 billion in losses tied to soured home loans.
. . .
Harry Reid of Nevada, was irritated that Mr. Bush had abruptly decided to outline a plan on his own instead of developing a bipartisan package with Democrats. “

http://www.nytimes.com/2008/01/18/bu.../18fed.html?hp
More tax cuts for the rich?

Wealthy may be next in line in US home crisis
Wealthy may be next in line in US home crisis - ABC News (Australian Broadcasting Corporation)


Welcome to Citibank

[Michaelangelica]

Seems too be getting worse?

"NYTimes. com News Alert" <nytdirect@nytimes.com>
to me

show details
04:12 (16 hours ago)
Breaking News Alert
The New York Times
Monday, January 21, 2008 -- 12:11 PM ET
-----

Stock Markets in Europe Plunge 7 Percent

Stocks fell steeply in Europe on Monday after sharp overnight
declines in Asia, reacting to fears that an American
recession was unavoidable and would crimp global growth. The
DAX index in Germany closed off 7.16 percent and the CAC 40
in France lost 6.83 percent. British stocks fared slightly
less badly; the FTSE 100 lost 5.48 percent. United States
financial markets are closed today; Canadian and Mexican
stocks were off sharply at midday.

Read More:
The New York Times - Breaking News, World News & Multimedia

-----
Visit our mobile site for the latest news:
The New York Times

[Qfwfq]

Tonight Asian markets plunged even worse. This morning European markets opened a bang lower and staggered back up to around yesterday evening. New York opened down and is still down, despite the FED's hefty 0.75% cut, Dow rose back to touch 12000 and is now staggering back under it (last minute's quote DOW-1.11% NSDQ100-2.43%). All talk is about recession, with mentions of the Great Depression. It has been obvious for a long while now.

[Qfwfq]

Dow creeping back above 12000 but still under Friday evening and I wonder how long the bargain hunting will last...

[Michaelangelica]

Panic easing on Aust share market

Posted 7 hours 35 minutes ago
Updated 5 hours 28 minutes ago
After 12 straight days of declines, local stocks have reversed some of the losses. (File photo)

After 12 straight days of declines, local stocks have reversed some of the losses. (File photo) (AFP: Greg Wood)

Panic on the Australian share market is easing after a move to ward off recession in the United States.

After 12 straight days of declines, local stocks have reversed some of the losses made in yesterday's freefall.

Panic easing on Aust share market - ABC News (Australian Broadcasting Corporation)
America sneezes and the world catches a cold.

I wish I had money enough to play this chess game.

[freeztar]

Originally Posted by Qfwfq

All talk is about recession, with mentions of the Great Depression. It has been obvious for a long while now.

Yes, the "R"-word comes up a lot in conversations these days.
Your mention of the Great Depression got me thinking. I went to wiki and pulled up the article. In it, there's a great explanation of what FDR's chairman of the Federal Reserve believed caused the GD. It's an interesting, and scary, read if one tries to draw comparisons to our current situation.

As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation s economic machinery. [Emphasis in original.] Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped [Emphasis mine].

Great Depression - Wikipedia, the free encyclopedia

[Michaelangelica]

Sometimes Ii think the whole economic system is one big poker game.
With just as much testosterone.

One problem with recession is that it can be a self-fulfilling prophesy as people stop spending as they feel they may need their money if a recession comes. This, if enough people stop spending, is a good way to start a recession.

This NYT article is a brief summary of what is in the USA Government's 'stimulus package'.
http://www.nytimes.com/aponline/us/A...yt&oref=slogin
(I guess this answers the question of this thread A-"very bad")
I found The NYT article more interesting for its list of what was not in the 'stimulus package'.

You would think doubling food stamps would be the quickest way of stimulating the economy , rather than waiting for the bureaucrats to mail out a few million cheques. Money that people may, or may not, spend.
Food stamps would also go to the most needy in the society.

[freeztar]

Originally Posted by Michaelangelica

One problem with recession is that it can be a self-fulfilling prophesy as people stop spending as they feel they may need their money if a recession comes. This, if enough people stop spending, is a good way to start a recession.

Indeed.

You would think doubling food stamps would be the quickest way of stimulating the economy , rather than waiting for the bureaucrats to mail out a few million cheques. Money that people may, or may not, spend.
Food stamps would also go to the most needy in the society.

The worry there is multifold. How many people receiving food stamps are legal citizens? What happens to the money once it gets spent? etc...

You should join in on the economic stimulus thread I started in the social science forum.