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Indeed, if we are going to hope to bring as many banks OUT of receivership as we will need to do, it will have to be in the context of a recovery, and waiting to clean up the mess until the recovery happens means we are caught in a vicious circle, since the lack of confidence in the solvency of large money center banks makes recovery less likely.
My own prediction is that, for instance, the stock markets won't hit bottom unless and until the banking sector is repaired.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Sun Mar 22nd, 2009 at 04:21:42 AM EST
[ Parent ]
My own prediction for the US is that with the stock market in the toilet (whether or not it hits bottom), many medium sized companies that could raise funds in equity markets will need bank lending for working financial capital should there be a prospect of new orders.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sun Mar 22nd, 2009 at 11:34:14 AM EST
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Well, stock prices are underpinned by earnings, and for as long as earnings are perceived to be falling there won't be anything underpinning stock prices.

We're into second order effects now. If people are out of jobs then it doesn't matter much what the mortgage rate is or the market rent - they won't be able to pay.

So a second wave of defaults on apparently "prime" mortgages gathers pace.

I cannot see any conventional way of stopping the spiral we are in. The numbers are too fucking big.

Better try something unconventional, eh?

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Mar 22nd, 2009 at 11:44:36 AM EST
[ Parent ]


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