Collapse

They coincided with an IMF warning that the costs of the financial crisis are set to rocket to almost $1 trillion (£508bn) – higher than the Japanese banking collapse which caused a decade of stagnation.

Yes, and the Japanese losses were almost all inside the Japanese banking system. The current losses have been globalised.

As, umm, we were told the process of securitisation would in fact do it has done: shared and spread the risk.

Glory be, financial system works as advertised on the tin.

6 thoughts on “Collapse”

  1. Not so sure the system works ‘as advertised’, if what was advertised was, in essence, that sufficient oversight existed to prevent the sort of bad debt and excessive gearing we’re witnessing.

    If we assume that the global financial system will unavoidably experience periodic meltdowns, and that nothing can be done to moderate their severity, then yes, it works as it should. However, the latest crisis–not just one trillion dollars in CDO debt, but $45 trillion in overall credit swap debt (up from a mere $1 trillion in 2001)–indicates that there has been precious little attempt even to try to regulate credit-rating activities, nor to rein in virtually unfettered speculation using insane amounts of leveraging.

    We’re facing the very high likelihood of systemic failure over some $45 trillion of dicey paper, held by parties unknown, worldwide.

    I’m not entirely convinced that the present financial system really is entirely functional….

  2. I’m surprised you keep parroting this line of The Economists from two years ago when evidently its not true. The risks were almost all in the banking system still, and in fact there have had to be major government interventions in the UK and US in order to prop it up.

  3. On a lighter note, I always love the conversions in the papers. The original story was “almost $1,ooobn” – and was in fact $945bn. The Telegraph chooses to give an exact conversion of the $1,000bn – £508bn – ignoring that it was rounded up already. What is wrong with £500bn?

    Even the FT did this exact conversion of a rounded number this morning.

  4. Hence the near legendary “she looked a million dollars (£565m)” in the Telegraph report of a visiting model.

  5. Liz Taylor wasn’t it, and I think converted at the parity rate of 2.80.

    I had a friend once who didn’t like metric and we we were playing a computer game in which we were approaching a planet at something like 750 million kmph and he wasn’t happy until he’d converted it in his head to mph. I wasn’t sure it made a huge difference.

  6. “The current losses have been globalised.

    As, umm, we were told the process of securitisation would in fact do it has done: shared and spread the risk.

    Glory be, financial system works as advertised on the tin”

    Advertised by whom? Where?

    Sorry, I don’t recall ever being asked to vote for any party whose policy of ‘globalising’ anything. I don’t recall being asked if I minded possibly paying higher rates of interest because American banks have been stupid, greedy and evil enough to give half-million dollar mortgages to people mnanifestly unable to service them.

    Sorry, where was any of that on the tin?

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