Thursday, October 9, 2008

The crisis of the century

or for the first 10years at least ...

What are the fundemental causes?

Those are fast to point out at Greed or Deregulation ... easy target but almost certainly wrong ones.

Greed is the natural motivation of the market, it's everywhere but not all market go bust. Concerning deregulation or free

market, just keep in mind tat the financial market are certainly one the must regulated market.

So where to start as a part of the explanation?

- Regulation : it seems that it gave incentive for bank to go into all these fancy product and hide the risk
- Gouvernement : in a lot of country the gvt push the property buble - in the USA with the sponsored Fannie and Freddie

Ac, in the UK with the buy to let -
See here for a good presentation.

But we should not forget that the Fed, and the numerous restart of the economy might also explain part of it

Are we going to a great depression?

Maybe, if you see gouvernement starting to raise tariff, stop immigration, lobying for higher salary that's a good sign

that we are in the big dark road ...

Check that out if you're not frighten already

What's next?
Prob deflation, good for people with cash, bad for people with debt.

What gouvernement can do? .
Stay out of the way is probably a good idea. The Paulson plan was a joke use by MP to bargain for tax money. The bill

started at 3 pages ended up more than 400...
Saying that, the intervention by the uk gvt - recapitalisation - is considered as the only way to help. But the devil is

in the details so beware ...

My Advice?

Save, pay your mortage, get liquid.

Happy 2009 !


Yann said...

Don't you think the huge amount of liquidity injected by the FED, BoE, UE central bank... will lead to an inflation thus decrease the value of savings?

French Fry said...


every thing being equals it would. but the amount of liquidity is temporary and to compensate for the absence of liquidity between banks.

The burst of credit bubble is reducing the amount of money. it would need a lot of printing to over compensate that...

spicyhotpot said...

Well, at the moment the inflation in the UK is equal or higher than most saving accounts/bonds rates...

On the other hand it seems the best option available.

Any opinion on the current frenzy on the currency markets?

French Fry said...


It was yes for sure, buthave you look at the price of fuel recently?