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In the beginning of this century, when I was working in London on one securities related project, one smart old-school english gentleman said to me: Americanism will destroy this country. I did not disagree with him then and seems that we were right.

Sixstrings wrote:

It's harder in the US. The 11 Trillion debt that is shown around is just the Federal debt, from what I understand if you also throw in all the other Government levels you are closer to 25 Trillion.

Well, what I'm asking about are the "toxic debts." The bad mortgages, credit card debt, personal and business commercial paper.I'm just curious if the amount of known defaulted debt that the government is/will be guaranteeing excedes our GDP or not.

Total bank losses reported at this point are around 1 trillion. That is certain to go higher as more losses are reported. Goldman Sachs is projecting losses could go as high as 2.1 trillion before this is all through.
US Senate Votes Another $350 billion To Bailout Banks

Roubini is predicting a higher figure of 3.6 trillion.
[url=http://]Roubini: U.S. Banking System Insolvent, Another $2.5T of Losses Coming[/url]

$1 trillion is 7.2% of GDP.
$2.1 trillion is 15.2% of GDP.
$3.6 trillion is 26% of GDP.

Sixstrings wrote:The Brit press are really on top of this. Is there no contingency planning regarding supermarkets in the US, or are we just not told about it?

Don't worry, the gubmint has fleets of semis backed up to the rutabaga warehouses in Iowa, ready to restock the shelves.

errorist wrote:In the beginning of this century, when I was working in London on one securities related project, one smart old-school english gentleman said to me: Americanism will destroy this country. I did not disagree with him then and seems that we were right.

Um... where exactly did he think the majority of our cultural heritage came from? Having read just enough to be dangerous on English financial behavior over the last 100 years I think I know.

Anglo-ism is destroying us both... but if it makes him feel better to be able to blame it on someone else, that is fine.

Everybody needs somebody to look down on <- youtube

kublikhan wrote:$1 trillion is 7.2% of GDP.
$2.1 trillion is 15.2% of GDP.
$3.6 trillion is 26% of GDP.

Would that be based on the GDP of 2008 or 2009? Given that a huge percentage of the GDP was based on the "productivity" of the financial sector, if you have many banks failing here in the next year, do you think the GDP of 2009 will be near what it was in 2008?

The debt remains and in fact is growing, but the GDP is shrinking at the same time. I'd bet on debt being 50% of the GDP of 2009, if its a penny.

Malls are going out of biz, Carmakers are going out of Biz, Wall Stret s going out of Biz. Can you tell me just exactly what it is we will Produce in 2009 that will keep the GDP anywhere near what it was in 2008 or 2007?

The debt cannot be serviced other than by printing money. There is nothing we produce that could in reality pay it off. This system is TOAST.

Reverse Engineer

Found this article rather amusing - A journalist goes in search of 'Sir' Fred Goodwin to get him to apologise for screwing everything up.

http://www.guardian.co.uk/business/2009 ... oodwin-rbs

The thing to realize is the US debt is all denominated in US dollers, the US can stiff it's creditors by defaulting or slowly stiff them by inflating.

let's examine each of those scenarios:


1.) the default. if the us defaults, it loses its AAA credit rating, without question causing what would be the biggest run on treasuries in history, causing the dollar to crash and making it extremely difficult for us to "stimulate" the economy and continue overspending, making the recession into a full blown depression.

2.) the inflation. if the us tries to pull a weimar manuever and inflate it's way out of debt, that would destroy the dollar. the value will crash even worse than scenario one, possibly also causing a run on treasuries.


The effect both of these would have in common would be destroying what's left of the economy. Not good for us.

The economy has already been destroyed. We can no longer can manufacture shoes, for instance. Rebuilding requires economic calculation, which requires sound money. Hyperinflation is by far the worst possible outcome. Here Rothbard makes the case for repudiating the government debt.

http://mises.org/article.aspx?Id=1423

Quinny wrote:I bet you're glad you didn't return now!

Err, that's not totally 100% accurate...

JP

kublikhan wrote: Total bank losses reported at this point are around 1 trillion. That is certain to go higher as more losses are reported. Goldman Sachs is projecting losses could go as high as 2.1 trillion before this is all through.
US Senate Votes Another $350 billion To Bailout Banks

Roubini is predicting a higher figure of 3.6 trillion.
[url=http://]Roubini: U.S. Banking System Insolvent, Another $2.5T of Losses Coming[/url]

$1 trillion is 7.2% of GDP.
$2.1 trillion is 15.2% of GDP.
$3.6 trillion is 26% of GDP.

I can't dig out the links straightaway (if it is an issue I can) but I believe the overseas liabilities for the UK banks currently going insolvent are around 4.5 trillion pounds sterling - around USD 6.2 trillion. That's just the core paper debts and not counting derivatives etc.

The combination of the sinking pound, collapsing UK/US property markets and an over-borrowed treasury means that a UK banking collapse is becoming a very real possibility.

In which case read L. Bros x 10 & global. So just add, 'The World is F'd' and then you will all get the picture.

Sorry.

JP

ReverseEngineer wrote:

kublikhan wrote:$1 trillion is 7.2% of GDP.
$2.1 trillion is 15.2% of GDP.
$3.6 trillion is 26% of GDP.

Would that be based on the GDP of 2008 or 2009? Given that a huge percentage of the GDP was based on the "productivity" of the financial sector, if you have many banks failing here in the next year, do you think the GDP of 2009 will be near what it was in 2008?

I actually used the 2007 GDP value of 13.84 trillion. 2008 was 14.33 trillion. CBO is projecting GDP growth of -2.2% for all of 2009, which would put GDP at about 14 trillion. If you think things will be twice as bad as what the CBO thinks, you can double that to -4.4% GDP growth for 2009, which would put GDP at 13.7 trillion. That's about the same value as what I used in my original calculations.
GDP

mattduke wrote:The economy has already been destroyed. We can no longer can manufacture shoes, for instance. Rebuilding requires economic calculation, which requires sound money. Hyperinflation is by far the worst possible outcome. Here Rothbard makes the case for repudiating the government debt.

http://mises.org/article.aspx?Id=1423

Some parts of it have been, but things still have a long way to fall before we find ourselves in the great depression.


A lot of the manufacturing that was out-sourced was low end, low margin, labor intensive stuff. Even if our economy collapses, your average wage and standard of living would have to fall all the way down to Mexico's level before we can even THINK about getting those jobs back. That's quite a long drop you know.

As the UK is not and will not join the Eurozone for some time (decades) the forthcomming firesale makes a great buy opportunity for the French and German fatcats. What will remain from the core of UK when the leftovers such as the bio-/-aerospace industries change hands.. ? An overpopulated agricultural island and public libraries stacked up w. Churchill's memoirs how he won the WWII, hah?

<i>What will remain from the core of UK....An overpopulated agricultural island</i>

Remember the past, lest they be allowed to repeat it.
link

Mesuge wrote:As the UK is not and will not join the Eurozone for some time (decades) the forthcomming firesale makes a great buy opportunity for the French and German fatcats.

With what?

Sorry to be a broken record here but if London goes (as some are saying) thermonuclear then Paris & Frankfurt will be caught up in the blast, same as everyone else in Europe.

A few hours later the shock wave will reach New York, the sclerotic Citigroup and Bank of America will implode within hours, and will take down every lending institution in the US within 24 hours.

The following day, the wave will reach the Far East and every trading screen in Tokyo will fill up with impossible numbers.

Everything will stop. No transfers of capital, no FX, no global trade, nothing. Ships will turn-around mid-ocean. Regional wars will stop because bullets suddenly will be worth more than lives.

Within a week there will be tanks on the streets of every OECD capital and the lines for soup kitchens will snake around every block and every neighbourhood in the civilised world.

And that will only be the beginning. Enjoy...

JP