Global Financial Crisis

[Hereticpoo]

It's not for buying stuff, it's for keeping score in the global market. The more someone is willing to pay for you, the higher your 'rank' and the more respect and power you wield.

90% of that income probably goes into a series of automatically managed investment funds and disappears until the owner decides they want a set of matched hot-pink Ferraris for the fifth wife.

5 wives *cringe*

That would be HELL!

[blackie]

ok time for my 2c

the way i look at the Australian share market is:
the reason the share market looses so much money ( oh yeah this doesn't only apply to the aussie one btw:P ) is because people are panicking and selling their shares, therefore pushing these shares down. other shares are pushed down by other circumstances, such as bad returns etc, but the main thing that pushes the market down is panic. This started when the American banks gave out loans they couldn't collect on, and then spiraled into what we see today, way to much debt and the inability to pay it off. This leads to the banks having incollectable debt, which makes them loose money and therefore pushes their shares down more.
Then our very own RBA, cuts the interest rate by 1%, which is HUGE, which in turn, makes Australia less attractive to invest in, which in turn again lowers our dollar in comparison to international currency. making me sad

sadly, a large number of investors really have no idea what to do properly. i know that when i see the market bottoming out, ill be buying shares like crazy, and i know that ill make a good profit, and eventually the market and the world will even itself out. this has of course happened all before, although the decline stage that we are in now is happening much faster than what it has happened in the past, that's why we are so worried, if the dollar only dropped say 4c a month, people would still be annoyed but wouldn't worry as much as they do when it drops >4c a day :S

the share market is run by panic, when a new mining deposit is found by a company, so many people buy those shares, making the share price go up heaps, but this time it is happening in reverse.

so in short, im aiming to be rich when the crisis is over :P and remember it will all be over eventually, because the sunlight always comes after the rain

[STL]

I have no doubt when it'll be over. But I think many of the problems right now are more long term ones. You've got to remember Australia has its fair share of debt too and we -cannot- afford it forever. Not to mention even if our economy is relatively strong, it will decline and our debt will come back to smack us in the face.

The danger right now is that the hysteria is dragging companies that are perfectly fine into the mire. Companies with solid credentials are falling over not b/c they are bad businesses but b/c there is a credit squeeze. They cannot get the loans/financing to pay for the things that they normally do. And it's a circular effect b/c the shareholders of those companies too panic and it all goes to hell which it has. I do not think the issue is so much liquidity at the moment any more. With all the cash that Reserve Banks around the world have pushed out onto the market that should not be the issue. The principal issue is confidence and that's much harder to restore. Banks as it stands are unwilling to lend to not only customers who they fear might default but each other.

And I do like the idea of jumping on board when things hit the lowest too. I've turned my mind to that more than once. There's always a window of opportunity in a time of crisis.

But the part that angers me the most is the Commonwealth Bank's acquisition of Bankwest and St. Andrews. All this is going to do for it is solidify its position as the largest bank in Australia. This though will severely hampen competition in the long run. And isn't it ironic that a bank claiming to be having trouble getting funds can fund a $2 billion acquisition?

[i_amtrunks]

But the part that angers me the most is the Commonwealth Bank's acquisition of Bankwest and St. Andrews. All this is going to do for it is solidify its position as the largest bank in Australia. This though will severely hampen competition in the long run. And isn't it ironic that a bank claiming to be having trouble getting funds can fund a $2 billion acquisition?

Yes, I'm sure that they will struggle to make an 8 figure profit this year...

One positive of their acquisition of Bankwest is that there may not be anymore of those annoying Bankwest tv ads.

[TheDirtyDigger]

2 . Can everyone calm the fudge down about the economy?
Canberra correspondent Bernard Keane writes:



Everyone see Steve Keen on The 7.30 Report last night?

You can take your pick, Keen reckons, from either a recession more severe than the last one, or an Even Greater Depression lasting a decade with 20% unemployment.

With all due respect to Steve, he needs to get a grip -- as do plenty of other doom and gloom merchants. Mike Steketee today was declaring that Kevin Rudd could face the same fate as Scullin, the only other one-term Prime Minister -- undone by the Depression.

I’m still waiting for someone to produce some reasoning as to why the Australian economy is going to shrink, let alone fall off a cliff, because there’s no evidence for it. And the collective amnesia about the fact that six months ago we were all worried the economy was running too hot is particularly annoying.

The IMF doesn’t think we’re too badly placed. And unemployment figures for September came out this morning. Employment is a lagging indicator, so it presumably won’t tell us much about what’s happening now, but unemployment skyrocketed to an alarming ... 4.3%, in seasonally adjusted terms.

In trend terms, employment rose slightly and unemployment fell slightly. Employers who are still struggling to get skilled staff might be able to breathe a sigh of relief sometime soon, but not right at the moment.

And then there’s commodities and China. Chinese growth is tipped to slow to a sluggardly 9%. It wasn’t too long ago that the main worry about the Chinese economy was overheating, as well. You’d have to tip that the long boom in commodities prices is over, but who seriously thinks that with Chinese demand still growing strongly, they’re going to fall back to the sort of levels we saw in the early part of the decade?

But China relies on exports, people will object, especially to Europe and America. Indeed. But it also has 1.2 plus billion people, in a region with another billion people in rapidly-developing economies (remember that enormous disaster, the Asian economic crisis?). So far this is whites-only crisis.

And then there’s our currency, which is currently plumbing irrational depths that must make exporters weep with joy. A damn sight better than parity with the US dollar, even if it means petrol stays expensive.

Yes, almost certainly, the drop in growth will undermine the Government’s tax take. The Mid-Year Economic Forecast in December now takes on a significance it hasn’t for some years, as it will provide a pointer to just how badly Treasury expects deteriorating economic conditions to affect revenues. However, the Government has showed some nous on that front.

Lindsay Tanner and Finance officials have been engaged all year in a line-by-line search for savings through the Commonwealth Budget, the sort of root-and-branch savings hunt that hasn’t been conducted since Peter Costello undertook a similar hunt back in 1996-97, which will free up spending to be redirected if necessary. The Government should therefore be well-placed to maintain targeted spending without spooking the markets by wiping out the surplus or going into deficit.

And a few commentators might want to understand that the equity markets do not equal the real economy -- particularly when they are behaving as irrationally as they are currently. The US bailout is already being declared useless when barely a cent has been spent -- all because stock markets have tanked since it was passed.

People might want to wait until it starts working before declaring it ain’t working. Particularly when they represent the sort of investment banks that stand to directly benefit from even more taxpayer largesse.

Between professional pessimists like Keen, a media anxious to play up the drama and self-interested representatives of the financial sector, you’d get the impression the only rational response to the crisis is unrestrained panic. That will probably ensure predictions of a depression become self-fulfilling. Just remember how we finally overcame the last depression -- with a world war.

[MV75]

Overcame with a war. Going to war is what brought them to the state of bankruptcy they now face. That's what makes it funny.

I still see all of this as a way that American lenders can get themselves out of trouble from non-collecting because of their reckless policies and non-regulation. I still think they caused this to happen so that they can then get cheap shares and make their money back that way.

[TheDirtyDigger]

http://au.youtube.com/watch?v=_dmPchuXIXQ

[MV75]

This is what you should be watching:

http://au.youtube.com/watch?v=msNwqbhoiug

[Saintly]

folks, stop worrying and enjoy your toys while you can... it will be over soon enough..

if not, at least you would have enjoyed your toys before selling them off :/

[STL]

Oh god, I'm revising for my exams and I came across this:

Deputy Governor of the Reserve Bank in June 1990:
“The failure by lenders to maintain traditional lending standards, in the drive for market share added fuel to the fire. Many bankers did not tell borrowers “sorry, the security is not adequate, or the project is not bankable”.

It's amazing sometimes. We never learn.