Saturday, April 19, 2008

Global systemic crisis: Four big trends over the 2008-2013 period

Source: LEAP - Europe 2020

'...Global financial crisis – Savers and investors trapped into USD 10,000-billion worth of « ghost-assets »

If your banker managed to convince you to invest in the USD 10,000-billion worth of ghost-assets currently haunting the financial planet, then you have most probably lost everything even if you do not know it yet [2].

And neither G7-finance ministers nor IMF governors (who met last April 11, 12 and 13) can do anything about it. All of them are totally helpless in the face of the ongoing crisis. With staff cuts and gold sales in order to fill its deficit, the IMF today embodies the sinking of all the institutions created after WWII to regulate the world economy. The outcome of the mid-April meeting clearly reveals how incapable of working together are the various players gathered within the IMF and its various branches: on the one hand, public institutions longing for greater supervision over banking activities in order to prevent further financial catastrophes; on the other hand, banks quite satisfied with pledges of better behaviour. The only tangible result is near-to-mid-term inaction: the current crisis will continue to worsen while debates will go on at the IMF. As a matter of fact, the very concept upon which the IMF is based is outdated.

In any event, according to our experts, the estimated USD 1,000-billion worth of assets lost in the current crisis is largely underestimated [3]. It is probably closer to 10,000-billion of USD [4] that are about to be lost over the coming two years [5]. In other words, several large international banks will be swallowed up in the maelstrom, and along with them many companies, too fragile or depending too much on the US consumer [6]..."

"Most of these « ghost-assets » are made of US mortgage loans, US dollars, and more generally US dollar-denominated assets, as well as British Pound Sterling-denominated assets [10]. They were created from nothing in the financial euphoria of the past decade by the “sorcerers’ apprentice” of Wall Street, the City and the other major financial places of the world [11]. Remember! Those were the times when every one raved about the “miracle” of this new finance which permitted to create a “financial economy” 1,000 times worth the real economy [12]. Well, for some months now, the happy beneficiaries of these infinite virtual riches have been striving to find them some tangible incarnation [13]...'

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