Chronologie der Krise

Wie aus einer Immobilienblase eine Weltwirtschaftskrise wurde…

John Browne: „Fed Faces Gigantic Insolvency Time Bomb“

Posted by hw71 - 30. August 2007

Wiederum von John Browne ein Artikel, der aufzeigt, wie es in Amerika nun weitergehen könnte: durch die „Subprime-Krise“ haben sich die Kreditvergabebedingungen drastisch verschärft. Neue Subprime-Kredite werden demnach kaum noch vergeben. Das erschwert zudem Refinanzierungen von bereits bestehenden Krediten, was durch sinkende Immobilienpreise ohnehin schon problematisch wurde.

Ausserdem zeichnet sich ein Trend ab, wonach die Schulden auf den Kreditkarten (trotz höherer Zinsen,die bei Kreditkarten fällig werden) wieder zunehmen – offenbar weil reguläre Kredite nun schwieriger zu bekommen sind.

Und als ob das alles nicht genug wäre, stehen bei vielen ARM-Krediten (Adjustable Rate Mortgages) nun höhere Zinsen an. Das alles wird dazu beitragen, dass der durchschnittliche amerikanische Hausbesitzer und Kreditnehmer monatlich weniger in der Tasche hat => noch streiten sich die Gelehrten, ob die USA bereits in einer Rezession stecken, oder ob sie sich noch abwenden lässt…

Fed Faces Gigantic Insolvency Time Bomb
In a most perceptive article, Ambrose Evans-Pritchard of the Telegraph warns, as we have done in the past, that an “insolvency” crunch could well follow our present liquidity crunch.

Meanwhile, our political leaders and Wall Street “cheerleaders” have succeeded in encouraging investors to believe that things are not too bad, corrections should be expected, and now is a good time to bargain hunt on market dips.

These “cheerleaders” (mostly managing funds that are “long” the market) persist in merely saying that the U.S. economy “may” be slowing.

In debate, they question aggressively the validity of any lead indicators, such as new housing starts, average work week, capital good orders and same store sales, in denying the possibility of a recession.

We prefer to look at “lead” indicators such as: average work week, same store sales, and capital goods orders (excluding defense and aircraft).

Our analysis shows that we are already appear to be trending, quite steeply, towards a recession.

Some other notable observers are at long last starting to agree with us.

Reuters reports that, in an ABC interview on August 26th, Lawrence H. Summers, former Treasury Secretary, said, “I do not think we yet would have a basis for making a prediction that there will be a recession. But I would say that the risks of recession are now greater than they’ve been anytime since the period in the aftermath of 9/11.

Today, John Bogle of Vanguard said, on CNBC, that he felt there was now a 75 percent chance of recession. This is particularly noteworthy as Vanguard is big and “long” the markets.

CNBC has just had an economist point out that even GDP (a coincident indicator), indicates, over the past five quarters, a downward trend to 1.95 percent growth. If the estimates for the third quarter are included, he said it would indicate a 1.5 percent growth rate.

This all points increasingly towards recession.

It is also interesting to note that both the European Central Bank and the Bank of England are now dropping hints that appear to indicate that they are likely to abandon their plans to increase their rates in the near future.

It is probable that they fear a recession in the United States may lead to a worldwide economic slowdown.

As we have said before, the prospect of recession is not the only bogy that our Fed now faces.

The Fed also faces a credit crunch, a possible insolvency crisis, inflationary pressures, a possible run on our dollar and financial markets that now expect a rate cut.

As we said in a recent issue, we believe the Fed is not asleep at the wheel, but frozen in fear at what it sees.

We must always remember that our Fed is somewhat limited in what it can achieve.

As we have said for many months, Ben Bernanke inherited the “Great Inflation Lie” — a lie which was the building block for the gigantic and reckless asset boom we have witnessed these past few years.

It was also a lie that has led directly to the massive erosion of our dollar.

By pumping in massive liquidity and by allowing the discount rate to fall, the Fed acted reasonably promptly to counter the risk of the inter-bank lending market grinding to a halt.

The Fed also did its utmost to encourage the banks to lend. But, armed only with the “string” of encouragement, it could not force the banks to on-lend the new liquidity.

The $2.2 trillion Commercial Paper (CP) market is still in trouble and so are its clients. Unfortunately, many of our corporations role-over much of their short-term debt in the CP market.

This inability to role-over short-term debt, coupled with a more restrictive lending policy by banks and falling sales, could soon lead to a wave of corporate insolvency.

We already know that many consumers are facing rate re-sets in their ARM mortgages.

Worse still, we know that many home owners, led by teaser rates, took out mortgages that they could not truly afford. They are now stuck in a vicious cleft stick.

My colleague David Frazier points out that consumer debt as a percentage of disposable income recently rebounded, after trending lower over the past two years. (See Chart 1 —a proprietary ratio computed by our sister publication, Financial Intelligence Report.)

A rise in debt at a time like this is unusual. Normally, the percentage of consumer debt rises in the “good” times of an economic expansion. It usually falls back when times are bad and the economy retracts.

We believe that consumers are now be being tempted to undertake increased borrowing, even at exorbitantly high credit card rates, to offset the newly increased costs of their mortgages.

If we are correct, it is worrying in the extreme, because it points to growing consumer insolvency — an insolvency that threatens far worse than recession.

We are deeply concerned that, as Ambrose Evans-Pritchard hints, our present credit crunch could all too easily precipitate an insolvency crisis.

An insolvency crisis, spread amongst corporations and retail consumers, is a spectacle that should cause shivers to run down the backs of certain speculative investors, especially those who are leveraged.

As we have long predicted, cash is already king. Now, it is set to become an emperor.


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