Monday, November 19, 2007
Printing office in trouble
Big crises on credit market is threating economy; which became so dependant from loans as are junkies addicted to heroine.
Not only cynics are the ones that claims that banks again and again are finding the way to lose money.
And for real, for last few weeks bad news after bad news. This sad season was opened by the biggest New York's Citigroup, biggest financial institution in the world, Swiss USB, Bank of America , German Deutsche Bank, American Wachovia, Italian Unicredito and so on. Whit looses from same root they got company on credit markets from giants of Wall Street: Merrill Lynch, the biggest global trader with securities, Bear Stearns and Morgan Stanley. What matters with that list is only one of the problems in great looses that almost sinked
mostly all contemporary states, because only Citigroup and Merrill Lynch
together lost more than 18 milliards of $. Actually we should say that for now they lost , because by opinion of analytics completely clear, that the looses because of different exotic securities will climb on also in future. Those securities papers no one wants to buy,and in same time everyone wants to sell them. The same size of problem is also that also the names as UBS, the biggest Swiss bank, which looses are around 3.5 milliard of dollar. It is a bank that was till now known as on of best valuer of risk on credit markets. And if because of bad value of risk also of bank with such reputation are drowning in loses it is hard to predict, what all will economy have to face and in continuing of crisis on credit markets securities of rich countries.
Problem is that three months after beginning of crises it is not possible to be exact on where all will be the crisis and who all will become victims "financial weapon for mass destruction" as those papers were called by second richest man in states. The fact is that big banks produced those papers, and namely so that they would lover the risk, that is escorting that kind of crediting. Whit sells of securities, they base on paying off of home loans and other loans, we tought that the risk will remove from back of banks, that will spread over market and will become buyer duty. Limited loses clearly shows that risk around fall of in matter of American family homes loans fall anyway on banks, from where in most of times they also come from. All hard work , to find out where are also hiding such and different risks, are now similar to shape of cube, that street minglers are offering you to find out under which is hiding the rock, marble or something else.
Big question, that is staying without answer for now is what consequences will have continue of this crisis for real economy.
State finance functionaries, mostly those that have in mind control over financial markets, are saying that they evacuated the crisis and that there is no danger to threat the real economy, but fact is that we have to understand those statements with loots of mental ratio. Evan if those statements are coming from mouth of most respectable places or respectable individuals. There must be something wrong, and we also check that, because also one of most reputable and legend Allan Greenspan, ex executive of Central Bank in similar predictions was right one of six times. And they are showing his successor Ben Bernanke as flower maker , because he is showing the critical situation in American homes market or on credit markets in pink colors, meanwhile the truth is completely different. All this and other functionaries are not being payed to awake additional fear, but to in any situation lower the panics. That is why we need to look for reliable values somewhere else.
And the data about parts if finance sectors in economy are predicting, that strikes , that those institutions are suffering from, wont be able to live none consequences on real economy. Banks and other financial institutions have almost one third in total profit, that is created by American corporations. And that is much more than in 1950 (8% only) and in 1990(20%). All consequences off course isn't possible to predict , but fact is that the economy newer in history was not so incurred debts (so depend on loans) and that in whole home sector newer been so occupied with incurred debts as now. Ruin of gain in finance sector can not just pass by, like nothing newer happened.
Optimists are warning on state statistics which showed, that appearing crisis , that started in August did not affect economy in whole. Statistics says that in American economy in third three month period in 2007 had fastened the moving and it got growth, that comes (calculated for whole year) 3.9%. It is rarely that this kind of information got such amount of anger and distrust, as it happened at this time.
For rel it would be extremely unusual if all critics would be wrong. Now it is no more doubt that all kind of basics are more expensive. Oil price is just little under historical record, that it got in times of Iranian revolution in year of 1979, that reached a price for barrel $45 transfered to now days value of dollar $101 for barrel. That is fact for almost all kind of goods as raw materials, food and metals. It seems like ex front man of BHP Billiton was right that moving of those prices are result of now days factors, which could easily compared to industrial revolution or economical renewal after second world war. Today factor are China, that has in this point of view and in this moment part like in those times had been played by two mentioned events. Also on this field exists something that shows as rule: ex head leader of that company had analyzed moving since 1812 till now days and found out- as in his times Russian economist Nicolay Kondratiev- that the prices of basic products will start to grow and continue growing for next 25 years.
From all this we can conclude with what kind of problems are now days leaders of important money printing offices confronting, especially Americans. Big crises on credit market is threating economy; which became so dependent from loans as are junkies addicted to heroine.
That is why we would like to make it easier for patient with additional softening of monetary politics. Going higher with oil prices and other important goods is threating that in case of softening financial politics will make mad the inflation.
Problems become additionaly complicated with fall of price of special metal. This new appearance dissident is in this case copper. Dissident is very dangerous , and there are reasons for that, for that it must be reason that this metal on stock market is called Economy Doctor. Copper got this title because of its ability to predict future of economy. And if copper is predicting overturn of economy down, oil and other good predict higher inflation, that makes double trouble that in last seventies got glamorous name stagflation.