In 2013, we are receiving the same banker and mass media propaganda that we heard in 2008. The stock markets are okay, economies are recovering, blah, blah, blah. However, do any of the facts support the propaganda? For example, this “bullish” US stock market has not even recovered to the levels of October, 2007. And even, if more QE, more HFT low-trading volume rigging can rig US and other western markets higher, do rising stock markets even matter if the growth of stock markets are less than the Central Bankers’ devaluation of the denominated fiat currencies? So, today, we should be asking the question, “Who sees another economic crisis coming and why?” In the meantime, my friend, journalist Lars Schall takes an investigative look back at 2008 and answers, the question, “Who saw the economic crisis coming and why?” Below, I present you his article. – JS Kim.
Who saw the economic crisis coming and why?
You have heard the widespread thesis that no one saw the current financial crisis coming. That thesis is simply wrong. However, it makes sure that those are not seen and heard, who a) did see it coming, who b) could have prevented it, and who c) have the knowledge of how we can get out of the mess we’re in.
By Lars Schall
The following article was originally published at Asia Times Online here.
Hans-Olaf Henkel is Professor of Business Economics at the University of Mannheim. Previously he was chairman of IBM Europe, Middle East and Africa and President of the Association of German Industries (1995-2000). He is a leading advocate of a split of the eurozone.
Henkel is also a leading figure in a new political group, “Alternative for Germany”, which is expected to be an official party in time to contest the September general election. Its main plank is the abolishment of the euro. (See here.) On March 4, Deutsche Bank Research published an analysis concerning its prospects. (See here.)
In the following article, Lars Schall revisits a debate over comments Henkel made in 2009 in which he attributed the cause of the sub-prime crisis and subsequent global financial crisis to political “do-gooders” ending the practice of banks in the US “redlining” specific areas, such as slums, often with a specific ethnic population, as no-go zone for home-loans.
Needlessly introducing new fear chokes off bull market
Only a few days ago, the markets were looking in good shape — indeed in better shape than they have at any time since the crash of 2008.
Japan was coming back to life. The Dow (DJI:DJIA) was recovering its highs of five years ago. Some of the European markets were bouncing up again, and gold was falling in value as investors decided the economy was getting back to stability, and perhaps even a normal level of growth.
And then? The euro-zone crisis flares up again. In Cyprus, euro-zone finance ministers meeting late on a Friday night decided to impose a levy on all bank accounts in the country as part of a bailout agreement for the island.
For the sake of 5.7 billion euros — a sum so small it would be an insult to peanuts to compare it to a packet of the salty nuts — the people running the single currency put the recovery in jeopardy.
It was a “Lehman moment” — a tiny decision, with huge consequences. And the euro zone looks set to keep lobbing those moments at the market, choking off every potential bull run.
Cyprus voted down the bill to impose the confiscation of depositor’s money. The IMF must act as their bluff has been called by the Russians. The IMF must lose face here by backing down or they will start a Western world run on the banks.
The global elite have now proven that when the chips are down they are going to go after any big pile of money that they think they can get their hands on. That means that no bank account, no retirement fund and no stock portfolio on earth is safe. Up until now, most people assumed that private bank accounts were untouchable and that deposit insurance actually meant something. Now we see that there is no pile of money that is considered “off limits” by the global elite and deposit insurance means absolutely nothing. The number one thing that any financial system depends on is faith. If people do not have faith in the safety and stability of a financial system, it will not work. Well, the people that rule the world have just taken a sledgehammer to the trust that we all had in the global financial system. They have broken the unwritten social contract that global banking depends on. So now we will see a run on the banks, and this will not just be limited to a few countries in southern Europe. Rather, this will be worldwide in scope. Yoda may have put it this way: “Begun, the global bank run has.” All over the world, frightened people are going to start pulling money out of the banks. A lot of that money will go into gold, silver and other hard assets. And as money starts coming out of the banks, this could cause many of the large banks that have been teetering on the edge of disaster to finally collapse….
China is flashing warning signs that a financial crisis may be approaching, say two Nomura economists.
Those signs include a sharp rise of leverage, a slowdown in economic growth and skyrocketing property prices, assert Nomura economists Zhiwei Zhang and Wendy Chen in a research note obtained by CNBC.
Ominously, those were the same factors behind the 2008 financial crisis in the United States.
“China faces rising risks of a systemic financial crisis and the government needs to take action quickly to contain such risks. We believe the true extent of financial risks in China is not fully appreciated by investors,” they state.
A whopping 76 percent of Americans believe we’re at an economic precipice that requires difficult decisions to avoid a crisis, while only 18 percent say we’re on the right path, according to a new poll.
The survey was conducted by McLaughlin & Associates for YG Network, an advocacy group connected to House Majority Leader Eric Cantor.