The one reason I think he is incorrect, and admittedly he is the smarter guy in the space, is that he is not taking declining Oil imports into consideration.
If there was no Oil import crisis in the offing, I think the ultimate write downs could have come in between $1 - $1.3 Trillion. After a good flush, and some gratuitous money creation, and a couple of public hangings... our system, given enough Oil at reasonable prices and given the US$ status as the only potential reserve currency for at least sometime, could have pulled it off.
But then there was Oil.
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Royal Bank of Scotland says look out below! The following came off one of the Wall Street newswires and was sent to me by one of my former desk mate's from my Bear Stearns days:
"Royal Bank of Scotland issues global stock and credit crash alert - Daily Telegraph : Daily Telegraph reports the Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyzes the major central banks. "A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist. A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets... RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the "Crossover" index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets. "I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names. Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate... US Federal Reserve and the European Central Bank both face a Hobson's choice as workers start to lose their jobs in earnest and lenders cut off credit. The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. "The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation," he said. "The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets," he said."
I don't know if I would pull a Moses here and say that I was terribly sure that this would transpire in 90 days... I WOULD be willing to say 20% probability in 90 days, 50% probability within 12 months, and 90% probability within 24 months, and I just did.
Good luck!
Mentatt (at) yahoo (d0t) com
3 comments:
Well, we can't say we haven't been warned!
cheers
Andrew
Love it when these brilliantly praised analysts make such bold predictions about the banking and credit crisis. If I'm not mistaken almost every US based Bank has lost at least 75% of its market cap over the past 12 months. Way to go out on a limb! If the above analyst was not so worried about his job he would not state "cash is king". Cash might be king in his country but soon it will be worthless in our country! If the banking system implodes, which eventually it will, the above analyst will be out of a job and everyone who listened to this schmuck will be wallpapering their household with USD.
Greenbacks are defiantly not the place to be, our national debt service and social security benefits will be paid on time, but perhaps in worthless dollars. Don’t know about wallpapering though.
Wikipedia picture of: “A German woman feeding a stove with Papiermarks, which burn longer than the amount of firewood they can buy.”
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