[CAMWEST-discuss] (no subject)

Danny Hannan danny_hannan at yahoo.com
Mon Aug 15 23:42:51 UTC 2011

G'day all,
The financial situation OS is right on track for a major downturn in 2012, probably worse than 2008.  While the actual cause of the recent volatility in global markets remains heavily clouded, the failure of the US politicians to raise the debt limit got the gong.  My prediction was that the US housing market peak rate of defaults would cause the volatility H2 2011 but I don't expect to get every detail correct.
The similarities to the 2008 crash are there.  In H2 2007 we had the sub-prime mortgage crisis "cause" volatility.  The details of the sub-prime mortgage crisis are:
The sub-prime mortgage market made up only 15% of the total US housing mortgage market.
Only 30% of sub-prime mortgages were in default.
The returns to the financial institutions after defaults was about 50%.
So totalled up the sub-prime mortgage defaults cost between 2-2.5% of the total mortgage market.
To me that is just a pile of bull shit.  How can a loss of 2.5% of a market cause a crash, it may be a trigger for more serious underlying problems but not the cause.
The same with the US Congress failing to raise the debt limit, it may be the trigger for the volatility but not the cause.
The cause is the unsustainable economic situation underlying western economies.  So we have had our prelude to what is coming in 2012 as we did in 2007.  But the timing from now is very difficult.  The global economy is balancing precariously on a cliff edge, any minor incident could cause it to overbalance and fall at any time.  However:  Getting the traction to move to a position of safety is going to take much more time and effort, with energy supply on the decline and real energy prices on the rise I see only a very small probability of a fall being avoided.
Interesting comments from the Premier of WA.  Despite the production and export of natural gas from WA projected to triple in the next 8 years the Premier expects those reserves to last another 100 years.  That is in conflict with the Australian Energy Resources Assessment 2010, estimate of, at pre-2009 production, that our natural gas reserves had a projected life of 60 years.  At the rate of growth of production we will be lucky if the natural gas lasts 30 years  -  -  -  And what then?

danny_hannan at yahoo.com
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