The FT published this at 2.40pm today:
Financial crises occur when debt levels are excessive and asset prices fall. The severity of the recession that ensues can then be mitigated by large increases in government deficits and large cuts in interest rates.
Today the conditions for the next financial crisis are already in place. Debt remains at pre-crisis levels and US equities and UK property are seriously overpriced. But the ability to mollify the next recession with large increases in government deficits and sharp falls in interest rates has vanished.
As regular readers here will know, I have long argued that the stock market is heavily overvalued. In my estimation of valuation in the range of 3,000 to 4,000 (and may be lower and, right now) seems of asking more realistic than the current high valuation which is inflated solely by pension funds having no imagination at all about where to place their cash, to the detriment of their members. And, as we all know, private debt remains excessive in the death of some governments, like the UK, remains entirely manageable.
So I agree with the FT. August continues to look as if it will be a financial, and now potentially in the UK at least, a political bloodbath.
I hope Ed Miliband has an economic agenda ready and waiting for a manifesto for this autumn, because I think he might need one. This government has no chance whatsoever of getting us out of this mess.
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“Over 3 weeks ago, before Italian treasury spreads blew out by several hundred basis points, and before Italian bank stock trading halts became a daily occurrence, we suggested that the European contagion was shifting to Italy based on Goldman dark pool Sigma X trading. To wit: “Today’s most active names are Banca Monte dei Paschi di Siena, Unicredit and Intesa Sanpaolo. Translation: someone is actively positioning for serious action in Italy shortly.” That someone sure was right, and it is precisely this trifecta of stocks that at last check was halted on the Borsa. Well, based on today’s action at Sigma X, the next, and probably biggest domino may be about to fall: the UK itself, because coming in at position #2, just behind UniCredit, we see Lloyds Banking. And if Lloyds goes, the ones that will follow are Barclays and RBS. At that point, the financial crisis goes global”
http://www.zerohedge.com/
I have been saying this for years but does anyone listen???
The Economic Crisis is far from over It’s only just begun
It will get a lot worse before it gets better
If one of the big banks goes down will cause mass panic
But people go round with their heads in the sand
You need to be prepared as one day the money will run out!!!