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Thread: Will the banks stopped lending to sound businesses?

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    Default Will the banks stopped lending to sound businesses?

    An accountant of my acquaintance predicted months ago that continuing drops in property prices in 2009 would depress the value of bank mortgage assets so much that bank balance sheets would be wrecked to the point of insolvency risk.

    He now says that recapitalising banks with new treasury share issues won't help maintain lending to Irish businesses. In the rapidly deteriorating economic environment,banks will selfishly prioritise their own survival by investing new funds in government bonds instead of lending to customers. They will be forced to do so as mortgages defaults force asset sales to support bank equity capital ratios,sales that will lead to a downward spiral in property values. At the same time, rising loan defaults will take from the cash the banks need to support existing levels of lending.

    What to do? He says that the banks must be nationalised,an extraordinary opinion from a man with hard right wing views on economics.

    When I suggested that in return for a government guarantee of a minimum 7 year rate of return on rights issue shares,the government could extract a promise from the banks to continue lending. He thinks it would be impossible to enforce. When I suggested that the government could set up independent committees throughout banks to rule on loan applications,he felt the committees wouldn't be close enough to customers to make good decisions. Still,the committees could decide what was a feasible level of lending at group level and then leave it up to bank officials to implement the lending targets.

    Have P.ie readers seen evidence that banks have stopped lending to sound businesses?

    As for the banking and financial crisis in Britain, this analyst argues that rapidly rising public sector liabilities could lead to hyperinflation Weimar Republic style http://seekingalpha.com/article/1084...ticle_sb_picks
    Last edited by patslatt; 1st December 2008 at 01:52 AM.

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    Politics.ie Member Bobert's Avatar
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    It's hard to say what determines a sound business now.

    One poster on here suggested Elan might be but I disagree.
    Every one sees what you appear to be, few really know what you are, and those few dare not oppose themselves to the opinion of the many, who have the majesty of the state to defend them.

    - Niccolò Machiavelli

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    Quote Originally Posted by Bobert View Post
    It's hard to say what determines a sound business now.
    debt collectors and bailiff's are probably your best bet at present.

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    Quote Originally Posted by Bobert View Post
    It's hard to say what determines a sound business now.
    There are no sound businesses right now.

    Who in their right mind would lend to a retailer when the consumer isn't buying?

    Who in their right mind would lend to a wholesaler when retailers are going tits up on a daily basis.

    Who in their right mind would lend to an importer?

    The cost of leasing CapeMax Bulk Carriers has dropped from $230,000/day in May to $6000/day in October. There is a global shortage of shipping containers at the moment because so many of them are sitting full at the docks in China awaiting letters of credit from Banks who are unwilling to lend to importers/wholesalers in the West.

    Hundreds of Chinese factories are closing per week. Half their toy manufacturing capacity has already closed (+/-4000 factories).



    The bit people seem to forget in all of this is that this is Global, it is caused by a massive credit bubble the scale of which has never been seen before, and there is nothing we can do to stop it.

    We need to sit back and wait for it to collapse, and then invest in getting critical infrastructure (including certain manufacturing capability - pharmaceuticals, etc) back into operation/production.

    Throwing our future taxes at the problem in a futile attempt to stop the unstoppable is a nonsense.

    ..
    .
    "Always do right. This will gratify some people and astonish the rest." Mark Twain

    “When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” Napoléon Bonaparte

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    Politics.ie Member Bobert's Avatar
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    If anyone had a bit of cash tucked away now is the time to buy things...
    Every one sees what you appear to be, few really know what you are, and those few dare not oppose themselves to the opinion of the many, who have the majesty of the state to defend them.

    - Niccolò Machiavelli

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    Quote Originally Posted by Bobert View Post
    If anyone had a bit of cash tucked away now is the time to buy things...
    What kind of things ?

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    Quote Originally Posted by Bobert View Post
    If anyone had a bit of cash tucked away now is the time to buy things...
    Not yet it isn't!

    Wait til you see the bargains to be had next Christmas!

    ..
    .
    "Always do right. This will gratify some people and astonish the rest." Mark Twain

    “When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” Napoléon Bonaparte

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    Recapitalising the banks won't work they will just hoard the cash.Let them fail and the strongest will survive,the same as is happening in business.Its tough I have gone through it in the last 12 months but the market told me it was time to get out and leave it to the stronger companies.
    A champion of the people emerges with the age-old and appealing promise of "something for nothing" - to be financed through every-increasing taxes. Supply and demand are thrown out of gear - the overhead goes up; the effective use of human energy goes down; the standard of living is lowered because money cannot buy wealth that is not produced.

    WEAVER, HENRY GRADY,

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    Default Keynesian stimulus urgent

    Quote Originally Posted by SPN View Post
    There are no sound businesses right now.

    Who in their right mind would lend to a retailer when the consumer isn't buying?

    Who in their right mind would lend to a wholesaler when retailers are going tits up on a daily basis.

    Who in their right mind would lend to an importer?

    The cost of leasing CapeMax Bulk Carriers has dropped from $230,000/day in May to $6000/day in October. There is a global shortage of shipping containers at the moment because so many of them are sitting full at the docks in China awaiting letters of credit from Banks who are unwilling to lend to importers/wholesalers in the West.

    Hundreds of Chinese factories are closing per week. Half their toy manufacturing capacity has already closed (+/-4000 factories).



    The bit people seem to forget in all of this is that this is Global, it is caused by a massive credit bubble the scale of which has never been seen before, and there is nothing we can do to stop it.

    We need to sit back and wait for it to collapse, and then invest in getting critical infrastructure (including certain manufacturing capability - pharmaceuticals, etc) back into operation/production.

    Throwing our future taxes at the problem in a futile attempt to stop the unstoppable is a nonsense.

    ..
    .
    A massive keynesian stimulus in infrastructure spending,with projects fast tracked in 6 months through Bord Pleanala, is necessary to prevent the risk of mass unemployment in the teens.

    Given shambolic government deficits in 2009,funding will have to come primarily out of savings from maybe 50,000 plus public sector redundancies concentrated among the very overpaid €50,000 to 100,000 a year set,a form of income redistribution outside the tax system. Heavy tax increases on high incomes with tax rates as high as 60%, coupled with tax cuts for low to middle income earners, will also be needed for the duration of the borderline depression. This stimulus is necessary to support employment, property values and bank solvency.

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    Politics.ie Member Bobert's Avatar
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    Quote Originally Posted by jerryp View Post
    What kind of things ?

    Commodities, Financial Stocks, Chocolate...


    Quote Originally Posted by SPN View Post
    Not yet it isn't!

    Wait til you see the bargains to be had next Christmas!

    ..
    .
    There are sales before Christmas this year...
    Every one sees what you appear to be, few really know what you are, and those few dare not oppose themselves to the opinion of the many, who have the majesty of the state to defend them.

    - Niccolò Machiavelli

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