“This is not just a financial crisis its a major economic collapse”

US Fed Chairman has finally admitted he got it all wrong:

I misread subprime crisis: Bernanke

November 24, 2008 – 8:53AM

    US Federal Reserve chairman Ben Bernanke acknowledges he was wrong in believing that there would be limited fallout to financial markets from risky mortgages that soured after the housing market’s collapse.

    ”I and others were mistaken early on in saying that the subprime crisis would be contained,” Bernanke says in an article in the December 1 issue of The New Yorker magazine.

    ”The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict,” he said in the piece titled ”Anatomy of a Meltdown.’

    Peter Schiff, however,  is incredibly insightful but nobody wanted to listen His warning in 2006: “This is not just a financial crisis for the US its an major economic collapse”.  Take time to watch this relatively short clip and you’ll see why this guy is so impressive.

    Peter Schiff – Fast Money Interview

    The warning reminds me of a recent post Australians going broke in record numbers

    The question now is, how will we fare?

    John Mc.

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    40 Responses

    1. I don’t know about us, but I know some factions of socity will be pinched for resources…

      http://timesofindia.indiatimes.com/Opinion/Columnists/Jug_Suraiya/JUGULAR_VEIN/Boom_and_bust/articleshow/3690079.cms

    2. How will we fare?

      Not very well I suspect. I think the worst is yet to come. Depsite senior figures maintaining that there is a shortage of housing in NSW, there is in fact a glut of properties on the market with no buyers willing to enter into a purchase with gloomy employment prospects around the corner.

      Despite the FHOG house prices are falling, the cost of building new houses is rising, new motor vehicle sales have collapsed and retail spending is looking dubious.

      A key indicator will be retail spending over the Christmas and New Year sales period.

      I just hope that people don’t resort to easy credit to sustain an otherwise unnaffordable Christmas.

      So far we have seem the impact of the housing industry collapse.

      We are yet to see the impact of people going bust due to credit card debt.

      And while interest rates are falling, a number of banks have actually raised credit card interest rates..

    3. I definitely think this is going to get a lot worse before it gets better. More mates now have lost their contracts at investment insurance companies in Sydney.

      It’s not gonna be pretty.

      But those responsible – like the guys at Citicorp – all have their bonus for all their good work in the past, that is now going to result in a lot of people suffering.

      In insurance there is a concept of commission clawback, when a contract gets cancelled prior to the normal completion date.

      I wonder – can we instill something like that into business?

      When the fat cats get a big bonus or salary, and it turns out you misled and/or hid the real situation – we claw back the big money that was paid out. Income clawback.

    4. Ben Bernanke is full of crap. This guy was put there because he’d studied the ‘Great Depression’. He knew that his & Greenspan’s work (alongside Bush’s war, orchestrated food price surges, changes to bankruptcy laws, tax cuts for the rich etc.) would SUCK the American government revenue base to death just in time for an Obama victory.

      There was no way the CHESS PLAYERS were going to let the American public have decent healthcare & affordable services if it meant that their obscene wealth was to be tapped & THEIR CONTROL was diminished.

      Some of the same cruds who put into place the policies in the late 90s that led to this economic disaster…and those who promoted plans to BAILOUT the financial criminals recently (including, disgracefully, Rubin’s Citigroup)…have now been given highly INFLUENTIAL positions as part of Obama’s economic team.

      The Rothschild bankers, The Rockefellers, The Saudi & UAE princes, Warren Buffet (no HERO to me) and all those slimey investment bankers & other industry execs who live off the workers & taxpayers like vampires will be looked after…given stern warnings and slaps on their botties by a PUPPET SENATE and then sent on their merry way, champers leakin’ for their corrupt butts.

      Regardless of the crap they sell to the public, the greed that powers their engines, and the damage they’ve inflicted on this planet and its occupants the SCUM OF THE EARTH will be repackaged & told to rule another corporate roost…and their MUGS will be splashed across our TV sets & monitors once again…courtesy of of the Corporate media & the puppet politicians who seem to get PERVERSE PLEASURE in befriending & promoting SCUM…& giving the middle finger to the Guardians of Democracy and Pursuers of Justice.

      But bide my words, the anger in the community is swelling…the cynicism & awareness growing…the riots in Iceland & Thailand a mere taste of what is to come if THE PEOPLE feel CONNED & SCREWED OVER yet again.

      No longer are people reading & watching PAP & PROPAGANDA uncritically. The stress they are feeling is reaching boiling point. They KNOW that BAILOUTS for Citigroup & such are just plain wrong if the governments do not EXACT a price, gain some control over these corporations, force them to sack their corrupt & negligent execs, and ensure that these FAILURES do not receive payout packages.

      It is not the public school educators who are to blame for the apathy & illiteracy & violent bahaviour of some students…it is a CORPORATE system that promotes INSATIABLE GREED & CUTTHROAT ETHICS & has little regard for the promises made to the average WORKER…that is willing to DISPOSE of worker’s conditions & pensions at the drop of a hat when it looks as tho the CHESS PLAYERS are not going to BENEFIT as they once had…yes, those MANIPULATORS who are willing to exploit any resource, promote any BS to ensure profits drift ever upwards to the largest shareholders….THEM.

      It’s not surprising so many kids are going loopy these days…failing at school in some areas…when children see their families fight over money & worry over jobs & losing their HOMES…too often caused by irresponsible & insane corporate managers…and their parents/guardians dive into drink & drugs to ease the pain…and corrupt politicians & CEOs are shown time & time again to GET AWAY WITH IT…are even given promotions, rewarded…it’s not surprising then that parents become depressed, lose control of their kids…& kids having been propagandised to be HARD BAS*ARDS and CRAZED CONSUMERS & DOBBERS and put thru the angst of CONFLICTING MESSAGES on global warming, war, race, animal welfare & consumerism, reach for the same or similar drugs & drinks they see their ANXIOUS, AGRO parents taking…and show off their CONFUSION & HATE & INSECURITIES on YouTube…

      And the blame can also be placed on the likes of Rupert Murdoch & his ilk…those who churn out war-mongering, tax avoiding, fear-mongering, community dividing, sexually tittilating, distorted, finger-pointing, hypocritical, tabloid-driven pap…& TV shows & movies that teach children day in & day out to be VORACIOUS CONSUMERS & “fear of being on the edge of the Apocalypse survivalists” w/out a moral bone in their body. And social networking sites that feed illiteracy & gossip & rampant capitalism. The HELL that educators have to tolerate today is almost unimaginable. Politicians haven’t the slightest idea…nor do IDIOTS & SCHEMERS & PROFITEERS & GREEDMEISTERS like Murdoch…& those who kneel at his altar.

      Certain politicians & their media ENABLERS & the CHESS PLAYERS they dance for can keep on FINGER-POINTING…blaming the innocent…but the people are WAKING UP. And I predict if real CHANGE & JUSTICE does not come…there will be RAGE in the streets and against the CHESS PLAYERS & their ENABLERS that will make the Icelandic & French riots look like a couple of lightning flashes before the HELLCLONE.

      The YouTube violent vids are highly worrying…signs of worse to come if HOPE does not become a REALITY.

      No longer eyes wide shut
      N’

    5. Worth reading:

      http://www.nytimes.com/2008/11/23/business/23citi.html?em

      (The Reckoning
      Citigroup Saw No Red Flags Even as It Made Bolder Bets – NY Times)

    6. Naskng @4.

      Brilliant.

      “I’ll have what he’s having!”

      🙂

    7. Dealing with depression – might have been an appropriate tiltle for this thread too…sreb!

      I think JMc and I have been saying that it will get worse before it gets better…about five years

      …I keep waiting for the insurance and re-insurance industry to implode, big time…when that happens we will be near the “bottom” that everyone keeps talking about…

      …I do believe that a positive outlook is the best way to get through it but also to tell the truth…I keep getting into discussions at social gatherings and being told I’m too gloomy – or in one case being told (screamed at) it was my fault, (or people like me telling the truth)…people can be strange when frightened…and don’t want the truth…

      …watch our own government slowly feed the information to us as we go lower…

      …the biggest problem we have at the moment is Malcom Turncoat telling everyone that Rudd got it wrong for political gain…he doesn’t know what is right – no one does…but it doesn’t help people’s confidence and may influence wrong decisions…

      … but he does know that it will get worse – then he will come out with the, “I told you so…”

    8. “…watch our own government slowly feed the information to us as we go lower…”

      That’s what worries me TB, that and the RBA’s largely anticipated forthcoming cuts – next month largely tipped to be between .5 to 1%.

      I suspect that things are going to get a lot worse next year, which is why Rudd keeps making noises about things are going to get tough. The RBA also knows more than we do, if they’re cutting rates so drastically. Their forecasts must be pretty gloomy.

      I think Wild Swan is deluding himself if the still thinks there’s going to be ‘modest growth’ next year.

      Mind you, on the other hand ‘bad news’ sells newspapers, so it’s easy to become too pessimistic if you judge things by what’s in the media alone.

      If Obama’s stimulus package is effective, we could well see a turnaround early next year.

    9. TB

      Completely agree about the insurance and RI industry.

      Already they are beginning to reduce staff numbers via non-renewal of contractors.

    10. 5 years is a bit extreme, I reckon 2 years will be about right. Australia has 2 things going for it in this crisis, mineral exports and institutional investment (eg money going into super).

      I think the criticism of Rudd and Swan has been fair. They are trying but they are oversteering, and it’s making matters worse, and adding to the perception that they are a bit cowboyish. Ya can’t protect everybody, and the best protection that the govt can provide is to make sure that there’s enough in the coffers to pay out some genuine welfare to the punters that are caught at the bottom.

    11. “I think the criticism of Rudd and Swan has been fair”

      Really?

      What marvels of wisdom have we seem from the Opposition, if they are so convinced that Rudd and Swan don’t know what they are doing?

      You can almost hear the tumbleweeds roll past Talcum’s office…

    12. reb,

      surely you mean “past Talcum’s small rented office”?

    13. LOL!!

    14. I suspect that things are going to get a lot worse next year, which is why Rudd keeps making noises about things are going to get tough. The RBA also knows more than we do, if they’re cutting rates so drastically. Their forecasts must be pretty gloomy.

      This morning watching ‘Breakfast’ I heard someone making a comment regarding China and they said something along the lines of ‘as much as we can trust any official information from China’. As if we are being told the truth, the whole truth and nothing but the truth.

    15. I’d sooner believe anything that comes out of China before I believe something I hear on ‘Breakfast’ television!

    16. The prediction this morning was that Interest rates would be dropped by the Reserve next week by 1.25% with rates expected to be as low as in the 1960s by the end of March.

    17. “low as the 1960’s?”

      How cool is that! me and the other arf, are paying an extra $2000 a month into our mortgage, while we’re both still employed!!

    18. James of North Melbourne: Australia has 2 things going for it in this crisis..

      And in addition of course the people of Australia. We lot tend to be fairly layback and not prone to panic. Our good old she’ll be right attitude.

    19. Yet, events are unfolding in such quick and stunning succession that it’s hard to grasp their meaning or put them into proper perspective. Is the economic panic fueling more panic? Or are we just waking up to the reality of the real WMD, as Friedman suggests? Let’s ponder that shall we at “Another Day, Another Bailout” at http://www.justmypointofview.wordpress.com?

    20. reb

      One thing we have in our favour is the Reserve has a loong way to go until their rate is 0%. Most countries are extremely close to 0% now so they have very little room to move to stimulate their economy. I suppose that is one blessing we have in all this mess.

      I still refuse to be the prophet of doom. There are many doomsayers and if they predict doom year after year of course they will be right somewhere along the line and then say I told you so. Same with the eternal optimist. It is always wise in hindsight to state what people said 1, 2, 3 or even 5 years ago, the big question is how long have they been saying it becuase they will get it roght sometime as the economy does cycle.

      PS : My super is now losing $119,890 as of last Saturday.

    21. With nowhere else to put it. Of interest, Turnbull states that he will not seek to frustrate the government’s dismantling of Work Choices.

      Sorry..as deaf as a post in my right ear at present. If I have missed anything, apologies.

    22. Shane,

      Exactly right. No one can predict what will happen tomorrow, next week or next month..

      I think the market will rally after Obama’s stimulus package is announced, but that’s just a blind prediction…

      Which is just as good as anything you’ll read anywhere else for what it’s worth…

      🙂

    23. The London stock exchange posted record gains after the British government unveiled a GBP20 billion ($47 billion) stimulus package to boost the economy. London’s FTSE100 posted its biggest ever one-day gain, jumped nearly 10 per cent.

    24. Min (comma) you’ve been deaf to anything from the right for years:)

    25. Tee hee, how true James. Actually I went to Canterbury Girls’ and grew up in Kooyong. Sad to see that you’beaut mate Petro Georgiou has decided to give it away. Good old Petro, the voice of reason and the penultimate small l liberal.

    26. Major economic collapse???

      Maybe in some peoples eyes but not mine…I don’t care if the whole system goes down the gurgler, myself included as it is all about money to the detriment of our society, if you can call it that and our environment.

      I say let it crash so our system can be rebuilt without the blood suckers at the peoples throats…I’m willing to take the pain for the good of future generations…are you???

      Music Break.

      http://uk.youtube.com/watch?v=4hkjkTe5kZE

    27. Bloody Hell !

      I really don’t understand why some of you even bother getting out of bed each morning.

      Stop taking notice every damn financial opinion for just a moment and consider the fundamentals.

      1) USA housing stock levels are ridiculously overstocked presently.
      2) These stocks will be exhausted within 18 months
      3) That means the Yanks will have to start building houses again in 18 months time.
      4) That means they will need white goods and electricals again.
      5) Guess who manufacture white goods and electricals…………….ah ! that’s right China.
      6) Chinese government has not even announced how its going to spend its 800 billion dollar stimulatory package (stimpack) but the stimpack will most likely be spent on expanding infrastructure.
      7) Totalitarian regimes don’t like having unemployed peasants running around in their cities as History says it tends to end in Revolution.That means they ned to Stimpack a few times to keep them head down bum up (employed)

      On an even better note BHP has dropped its bid for Rio. Get set to see Rio absolutely tank tomorrow with BHP probably set to rise perhaps violently. But perhaps market will in fact mark BHP down for a little while yet.

      So stop lookin’ for reasons to cry and start looking for opportunities.

      Rant over !

    28. Oh and another thing while I have a whinge

      How dumb can some governments be.

      The UK government have now decided that if you fly out of one of its dysfunctional airports bound for Australia you will now pay $200 each as a departure tax. Its now based on the distance you intend to fly.

      What a great way to destroy your own tourism industry.

      So what’s to stop me catchin’ a train over to Paris and then catching a flight back to Sydney therefore paying the minimum tax.

      I mean do Treasury people actually use what brain matter they have ?

    29. I noted that Walrus…especially the notice given to Rio.

      I smell scummy jam.

    30. Nasking. Thank you for that brilliant piece. I concur entirely. Greenspan knew full well the effect of flooding the money market with 1% interest rate treasury funds. The parasites who prey on the disadvantaged/low socio-economic crop identified an untapped market, then proceeded to hand out money like drunken sailors, taking rebates (kick-backs) along the way again knowing all the while the proverbial was going to hit the fan sooner or later.

      Hence the golden parachutes for the king parasites as personal insurance (theft) for what was to come. Also feel Wall Street knew they were selling Fannie and Freddie lemon packages, but took the sales commissions anyhow. Amazing.
      Gerry Harvey works the same technique. Rebates from suppliers, kickbacks from GE and other predatory lenders, and Gerry’s hunky dory. Meanwhile, the national debt to asset ratio both here and the US is a complete financial basket case.
      You all know the song . . . I owe, I owe, etc.

      TracieFNQ. Talk about trusting official information from China, one must simply laugh at these moronic banal show hosts.
      If and when (most probable) Chinese interests make offers to buy the decaying remnants of Ford, Chrysler and GM, on their (Chinese) terms of course, we shall see who deals in truth, and how that truth hits home in the US.

      ‘criticism of Rudd and Swan has been fair’ J of NM.
      But of course. Nothing to do with substance or adversarial politics. Sounds like Murdoch.

    31. I’m going to have a whinge here. I made a statement. The criticism of Rudd and Swan has been fair. I followed it up with an explanation of why. It had nothing to do with anything Turnbull or the Libs have said, it was my own assessment. But I’ve been pinged on the initial comment twice. Without any attempt to address the substance of what I said.

    32. James

      Looking at your comment @ 10, you say that they have been oversteering.

      How?

      I think that is what the other commentors are asking for, because the substance of what you say is thin.

      Just sayin’

    33. Some economists are saying we are now at the bottom of the market, so as that skinny blonde chick Yazz says “the only way is up..”

    34. Not happy reb, now I will be singing that damn song all day:

      The only way is up, baby
      For you and me, baby
      The only way is up
      For you and me

    35. Joni, they only needed to ask, rather than just pull the statement without the explanation. The deposit guarantee was one example of oversteering. The market is reacting, overreacting, to every bit of news that appears. Given that, and given that that has been apparent for the duration of this crisis, it would be prudent to err on the side of caution in making fiscal and monetary decisions. Therefore a cap on the guarantee would have been sensible. Interest rate adjustments of 1% and greater (not the govt I know) is another example. Can I suggest that if interest rates are dropped too far too quickly, not only will it have little effect because people are too scared to spend regardless, it will also remove the opportunity to use that tool to help stimulate the economy once the dust settles and the economy tries to recover. Similarly with fiscal stimulae. That’s not going to resolve the crisis, but if you spend the entire surplus too quickly trying to stimulate spending when no-one will spend regardless, you again remove that tool from your toolbox for when things settle down.

    36. Gee, it that why they get the big bucks. If the poor old punter made a monumental mistake, he’d be on the streets or in the unemployment que. Ben and the board of the Federal Reserve balls up the worlds economy, come out and state the bleeding obvious many months after the effects are starting to bite..and acknowledge “they got it wrong”. Why are they still in their jobs when they are responsible for many of thousands being unempleyed and many thousande more being kicked out of their homes. How can anyone have confidence in the Bernanke team, when they have failed the world so miserably. It could only be in the Empire where the Empror is nothing short of a dickhead, that they could survive. Surely, someone in the Empire can see the Emprors new clothes are actually no clothes at all….he and his crew are fakes.

    37. “….he and his crew are fakes”

      Phonies, Queen Alexandra would call them ‘phonies’…

    38. As a telephone Lifeline Counsellor, the calls are coming in about the global financial crisis being the ‘last straw’. I know how these callers feel. For the 2nd time in 8 years I’ve had my savings in a Managed Fund haemorrhage. Financially, I can’t keep on taking these hits. Firstly it was my salary sacrificed super in the Tech Wreck, nose dived and is still not back to 1997 figures. Then it was the sale proceeds of my hard earned business, invested in a cautious managed fund, which has bled, bled and tanked, particularly in the last 4 weeks, lost 35%, scuppering all of my savings plans, it’ll take 10 years or more to make it back up. All I can hope for now is relatively good health so that I can continue to work well into my 70’s. I won’t have any choice. It can be depressing if I let it. All that family time spent earning and saving funds instead, gone, just gone, can never get that family time back.

    39. James. On a conciliatory note, yes, upon entering the realms of public life both Rudd and Swan should indeed be subject to public and parliamentary scrutiny. No argument there. However, the problem lies within me as I have had it to the neck with adversarial politics, the sometimes adolescent behaviour of our national pollies, left and right.

      I’m not particularly thrilled with Rudd or Swan as leadership material, hence, after the welcomed defeat of the rodent, I’ll let you figure out what I think of the rodent.
      Rudd and Swan have a Labor manifesto to follow, an egalitarian one at that. I’ll keep them to the word and spirit of that manifesto.
      In a former life I was a successful (small) business propietor. I payed/pay taxes. I expect the true disadvantaged, elderly, infirm, aussie children, honest unemployed to be assisted in the maintaining of their dignity, in the first instance, through the redistribution of those taxes.
      Time for the Liberals to put forward an alternative manifesto instead of taking petty hit and run swipes at the current government. I implore Libs to put up articulately or shut up, move aside. The rules remain the same.

    40. […] “This is not just a financial crisis its a major economic collapse” Posted on November 25, 2008 by johnmcphilbin […]

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