GLOBAL RESOURCES ANALYSIS
DANGERS | COLLAPSING BANKS
Recessions of economies or even collapsing economies can lead to collapsing banks due to massive write downs and also to collapsing bond insurancers: the fundament all banks are depending on. Bond insurancers have become certainly the central facet of the current financial system. Normally this would not happen because banks are historically very conservative in lending money. But the Western World has got the financial system it demanded: consumption growth by increased trade deficits. No questions asked, no one that looks to real values. One big cattle of sheep. Independent thinking about the headed future was considered as 'not done' of 'negative' and had been eliminated by the management. One large group of beautiful weather sailors. The banks (having a volume drive) and the bond insurancers (issuing their as long the sun keeps shining valid 'guarantees' that surprisingly every bank want to purchase in their volume drive) are not to blame, the governments are not to blame, it was a core/basic problem of the Western World. The Western World needs new leaders with long term vision, both in government and in the financial world. The internet bubble is over (and now just a stable economic development), the housing bubble is over (still collapsing in 2008, we've only seen the top of the iceberg yet). The completely by cheap and abundant credit and cheap abundant oil fueled economy has left us overnight. The party is over (Heinsberg). Banks their by Basel norms demanded Tier One capital has become just a fiction, just like that was in the First Credit Crisis in the early '80ties. The whole system is build on quicksand of to much credit and to much oil, while real economic values were considered old fashion, they will appear the be the only values left after the dust have left the air. The CDO (Collateralized Debt Obligations) disaster is not yet discovered for a bit: the largest economy of the world has been fueled by it for years, we talking about capital figures in sizes nobody really want to know for the sake of their peace of mind during days and nights. The damage is beyond any expectation and yet slightly discovered yet. The CDO disaster will be followed by the CDS (Credit Default Swap) disaster. As the bubble explodes (stop of credit fueling of the economy plus backfire effects) more and more companies get payment problems and many will go bankrupted, households will loose their jobs and thereby their incomes and will stop paying mortgage payments, interest payments, creditcard debt payments, car loans payments, consumptive credit payments and even taxes. The USA economy is heading for a never seen recession due the 'credit crisis' (better said: due to common sense). By Murphy's Law trouble never walks alone. The credit crisis comes simultaneously with PeakOil, obsolescence, and the end of the Western World's era in the global economic sun. The only capital values that survive the credit crisis are the real capital values (the value of a product seen in multi decade perspective). PeakOil will lead to a total reshape of economies. Reshapes always go sided by bankruptcies. Banks and governments certainly must proclaim PeakOil. Just for their own sake, to minimize damages for their capital (for banks) and income (for governments) and their future (and the future of their customers as in companies and households/civilians).
Author: Gijs Graafland
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