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Wall Street Meltdown May Affect Barbados West Coast Real Estate Out Of Control Development

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There is the saying that when America catches a cold, countries like Barbados are likely to catch a cold. While some Barbadians may feel insulated from what is happening in the US financial market, they are others who know better. Last weekend the world received the news that security firm Lehman Brothers had filed for bankruptcy, and that Bank of America had bailed the respected Merrill Lynch for approximately 50 billion dollars. Now that Lehman Brothers and Merrill Lynch have joined Bear Stearns on the financial dump, just two of the big five security firms are left standing in Goldman Sachs and Morgan Stanley.

As if the collapse of leading security firms on Wall Street is not bad enough, American International Group (AIG) is currently reported to be waiting on the Federal Reserve Bank to inject much need 40 billion in cash to offset massive credit losses. Barbadians maybe interested to know that AIG is the parent of ALICO which is an insurance subsidiary based in Barbados.

After watching the US networks and reading the many reports about the financial mess on Wall Street, it raises the question how could modern America with all of its smarts allow this to happen? It is being reported that the DOW dropped 500 points today. What this means is that many blue collar and middleclass Americans have seen their 401K, IRA, pension and other investments instruments drastically depreciate in value. Some financial analysts have put the positive spin on the meltdown by saying that it is a purging which is necessary to get rid of those institutions that have built their success on feather credit.

Barbadians should note that the stock markets around the world are inter-connected. Reports that the Asian stock markets have suffered a drop in points is instructive. The BU family would be aware that at the heart of the meltdown on Wall Street is the dumbing down of risks by large financial companies through the use of mortgage backed securities. It is all so complicated, BU family members should use google search to become educated on these matters. We are prepared to say that the financial wizards on Wall Street outsmarted themselves, and it was compounded by the regulators who nodded on the job.

There is concern in some quarters that the multi-million dollar real estate properties on the West Coast will be touched by the meltdown on Wall Street. Many of the investors who have been purchasing properties on the West Coast fit the profile of the Wall Street investor. The overnight reduction in the value of their personal fortunes held in stocks and shares will demand more financial prudence going forward.

BU thanks Bu family member x for the source material: New York Times

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104 responses to “Wall Street Meltdown May Affect Barbados West Coast Real Estate Out Of Control Development”

  1. Avatar
    Anonymous

    This is such a piss poor analysis, it’s unbelievable!

  2. Wall Street Meltdown May Affect Barbados West Coast Real Estate Out Of Control Development · Stocks-Trading.ExplainedOnline.Net

    […] Original post by David […]

  3. David Avatar
    David

    We are always on the look out to learn but couldn’t from your one liner.

  4. Avatar
    Anonymous

    Come on! I have 17 and 18 year old students in first year college doing better analysis than this.
    Where are your linkages? Give it some more thought if not you’re coming over as “too quick to rush to an uninformed opinion”.
    That’s all!

  5. Green Monkey Avatar
    Green Monkey

    Why Wall Street is Melting Down, and What to Do About It

    By Robert Reich

    Hank Paulson didn’t blink, so Lehman Brothers went down the tubes. The end of socialized capitalism? Don’t bet on it. The Treasury and the Fed are scrambling to enlarge the government’s authority to exchange securities of unknown value for guaranteed securities in an effort to stave off the biggest financial meltdown since the 1930s.

    Ironically, a free-market-loving Republican administration is presiding over the most ambitious intrusion of government into the market in almost anyone’s memory. But to what end? Bailouts, subsidies, and government insurance won’t help Wall Street because the Street’s fundamental problem isn’t lack of capital. It’s lack of trust.

    The sub-prime mortgage mess triggered it, but the problem lies much deeper. Financial markets trade in promises — that assets have a certain value, that numbers on a balance sheet are accurate, that a loan carries a limited risk. If investors stop trusting the promises, Wall Street can’t function.

    But it’s turned out that many promises like these weren’t worth the paper they were written on.

    http://robertreich.blogspot.com/2008/09/why-wall-street-is-melting-down-and.html

  6. The People's Democratic Congress Avatar
    The People’s Democratic Congress

    BU, your otherwise incisive and excellent lead story forgets to make mention of Fannie Mae and Freddie Mac, which – before being placed under the federal conservatorship of the Federal Housing Finance Agency – used to, et al, buy mortgages and repackage them as securities to be invested in by others in the USA and beyond.

    According to Wikipedia, as of 2008, Fannie Mae and Freddie Mac would have come to own or guarantee about half of the US’ $ 12 trillion dollar mortgage market. So, right away one can appreciate the overall great significance of their operations in the US housing/mortgage market.Well, since the US sub-prime mortgage market collpse in 2007, and the consequent housing, financial and credit market crises in the US and in some other parts of the world, there have been many financial and investment and securities institutions in the same US and elsewhere that have been taking severe beatings, some of which have led to their own demises ( Bears Stearns ), some to their own circumstances of being bailed out by others ( Morgan Stanley ) and thus restructurings, and some others more to their having themselves to file for bankruptcy ( Lehman Bros ), and, no doubt, to their having subsequently to carry out reorganization of their structures and functions too.

    But,with the leading economy and financial empire of the world (US)existing in a period of tremendous turmoil and uncertainty, it again helps to prove – to PDC – that the politics, economics, finance, and society of the western world have very little or nothing – except in regard of the technology and weaponry categories perhaps – to teach us – as so-called developing countries, esp. when we could, in fact, be in positions to make better use of our God-given talents, better use of our own learned and evolved techniques and skills, and more efficient use of our wherewithal, in ways that would see us help ultimately bring about, maintain and, furthermore, improve upon the right social, political, financial and material systems and techniques that would eventually help us become socially and culturally stronger and better off without being so dependent on Western society for our further survival and development.

    Therefore, it can be argued that it is fundamentally these wicked Western systems like TAXATION; INTEREST RATE REGIMES; THE REPAYING OF INSTITUTIONAL LOANS FOR PRODUCTIVE PURPOSES ARRANGEMENTS; IMPORTING THE “PRICES” OF OTHER COUNTRIES GOODS AND SERVICES; MOTOR INSURANCE SCHEMES etc. that have, in concert with other wicked ideological, political, social/value and other systems, helped to bring the giant American economy to its knees.

    That is why PDC’s fundamental aim is to – on behalf of and with the support of the broad masses and middle classes of people of Barbados – win government in this country, and -whereupon doing so – to thus begin properly to remove those above mentioned category of things and such more despicable things from the political and other landscapes of Barbados, and to have them rightfully replaced with more progressive schemes and systems for the great benefit of the masses and middle classes of people of Barbados and for the country as a whole.

    PDC

  7. David Avatar
    David

    The truth is we are not Newsweek or Bloomsberg. We are just a humble household who hold opinions which we will toss into the blogosphere to share comment etc.

    @Green Monkey

    In your post you mention a free-market-loving Republican administration “is presiding over the most ambitious intrusion of government into the market in almost anyone’s memory”

    Is there empirical data out there that discusses that the free trade market maybe flawed and responsible for the imminent collapse of the US financial system? In defense of the US market they are some who point to post 911 and the burst of the technology bubble as worst episodes in the financial market.

  8. Inkwell Avatar
    Inkwell

    This is what I find admirable about your blog, David….

    that you express your opinion without implying that others are silly….

    that you seek after truth and knowledge and not stick stubbornly to a bias…

    that you do not try to shove your opinion down the throats of others…

    that you show humility and not arrogance.

    Congratulations.

  9. David Avatar
    David

    Thank you Inkwell.

    We are aware of the responsibility we carry given the increasing popularity of the blogs. The minute we get majority feedback that we are short-changing the BU family, we will consider our job to be done.

  10. A word of caution Avatar
    A word of caution

    As most will find out in a few months this is not only going to be a short slight recession but moreso a severe one in the US and possibly the UK (among others). Access to credit that foreign nationals and Barbadians overseas would evaporate to buy those properties on the West Coast and any coast for that matter. The wealthy elite that occupy the homes on the west coast will suffer significantly as their net worth take a big hit from declining markets, real estate values and little access to credit to conduct their businesses. Take a look at Warren Buffet for example, regarded as one of the greatest investors of all times and one of the richest men in the world…. One of his many firms AIG (the biggest insurance company world wide) is on the brink of bankruptcy and a good part of his wealth is down the tubes with it as his equity in the firm has declined about 90% this year alone. Intertwined with the demise of AIG is a host of other companies worldwide (UK, Europe, China. Japan, Canada etc) that hold trillions (yes trillions) of dollars on its debt and equity…. These will have to be unwound and there will be significant losses. This is a cycle that feeds on itself. While AIG is bigger and has not failed at this point, the other entities that did fail so far this year, Lehman Brothers, Fannie and Freddie, Indy Mac to name a few… these also have billions…no trillions of dollars in derivatives on their debt which will be unwound and in default. The US financial media had inferred that the US government has been reported to be calling across the globe asking China, Japan, OPEC and even Russia not to sell their US government/corporate debt as this would threaten the world financial system. The US economic model based on of vague financial services and a dominant financial sector is now in question and will now evolve back from the excesses over the coming years. It will cause some dislocation initially world wide.
    The problem we also find is that the US cannot afford to bailout any more institutions as they have to borrow the money from China, Japan etc. They have no savings. These foreign Central Banks have also been net sellers of US debt in recent months and if they do so at an increase pace then the debt will have to be monetized. Consider as well that the US runs over a trillion dollars in budget and trade deficits annually…all of this must be borrowed as debt from other countries. In addition to its trillion dollar deficit the US’s nationalization of Freddie and Fannie alone could lead to an additional 500-800 billion dollars in debt issuance over the coming year. This crisis really seems “To Big To Bailout”. Former Federal Reserve Chairman Allan Greenspan (who helped create this problem) now calls it a “once in a century” financial crisis…the worse he has ever seen in his career.
    If the trend of the last year continues the implications for the Barbados and the region could be profound as Diaspora remittances will decline significantly, real estate demand and prices decline significantly and the tourist arrivals from US and UK will decline notably as both countries are headed into a recession of note.

  11. Avatar
    Anonymous

    @ Inkwell

    Well if BU is constantly stabbing at our Fontabelle establishments (The Nation and the Advocate) then by doing so it’s holding itself up to a higher standard.
    In many instances BU has presented very well thought out analysis and has been congratulated for if.
    Just not this time.

    The question remains, where is the linkage between the Wall Street meltdown and the West Coast realty market?

    Global markets are linked and we had the Asian meltdown in the 90s and that was contained.

    Washington is trying to contain the Wall Street meltdown.

    What is or who fits the profile of the West Coast investor?
    The meltdown didnt just start.
    What we’re experiencing is really a correction to the markets that hinged a lot on the “irrational exuberance” (not my term) of the mortgage market and the lies of the credit rating agencies.

    So it’s part of the boom bust cycle that will be met with a massive bailout and more stringent regulations as is always the case.
    Shrewd investors never panic in a situation like this.

    Hence the question. What is the profile of the West Coast investor? Are they fly-by-night investors or shrewd ones?
    And how will the West Coast boom be affected?

    To constantly hit at Fontabelle, then present this shoddy opening lead-off is an insult to journalism.

  12. Green Monkey Avatar
    Green Monkey

    @David

    Is there empirical data out there that discusses that the free trade market maybe flawed and responsible for the imminent collapse of the US financial system? In defense of the US market they are some who point to post 911 and the burst of the technology bubble as worst episodes in the financial market.

    Traditional, free-market capitalism is built fundamentally on a flawed premise – that you can have perpetual, endless, infinite growth in a finite world.

    Why is economic growth a threat to the environment?

    The economy exists within the ecosystem. This fact is overlooked in business and economics textbooks, where the ecosytem is viewed as a subsystem of the economy, and the economy itself is portrayed as a circular flow of money between firms and households. The production of goods and services entails the conversion of natural resources, or “natural capital,” into consumer goods and manufactured capital. This explains why there is a fundamental conflict between economic growth and biodiversity conservation. Furthermore, pollution is an inevitable byproduct of economic production. The degradation of the environment as a result of economic growth occurs in many ways, but in general, economic growth leaves a larger ecological footprint.

    Why is economic growth a threat to economic sustainability, national security, and international stability?

    To grow, an economy requires more natural capital, including soil, water, minerals, timber, other raw materials, and energy sources. When the economy grows too fast or gets too big, this natural capital is depleted, or “liquidated.” To function smoothly, the economy also requires an environment that can absorb and recycle pollutants. When natural capital stocks are depleted, and/or the capacity of the environment to absorb pollutants is exceeded, the economy is forced to shrink.

    National security, meanwhile, is a function of economic sustainability. The economic strife of a nation may result in insurrection or revolution, and eventually the nation-state may turn its aggressions outward. From the Nazi doctrine of Lebensraum to the 21st century powder kegs, war invariably involves, and often revolves around, struggles for resources by nations that have exceeded their ecological capacities – or have had their capacities impacted by other states.

    Can’t technology alleviate the threat of economic growth?

    Some economists think that, because a particular production process can become more efficient (more output per unit of natural capital), there is no limit to economic growth. These economists and “technological optimists” are disregarding the second law of thermodynamics, the entropy law, which tells us that we cannot achieve 100% efficiency in the economic production process. When the entropy law is applied across all economic sectors, or in other words when the limits to efficiency have been reached, the only remaining way to grow the economy is by using more natural capital (including energy).

    Remember: to think there is no limit to growth on a finite planet is precisely, mathematically equivalent to thinking that you may have a stabilized, steady state economy on a perpetually shrinking planet. Both claims are precisely, equally ludicrous!

    http://www.steadystate.org/CASSEFAQs.html

  13. Krzysztof Skubiszewski Avatar
    Krzysztof Skubiszewski

    Don’t let “anonymous” fool you. There are those – especially Bush, McCain & their crazy tea lady Palin – who would like you to believe there’s nothing wrong with the global (U.S.) economy.

    There is.

    As someone said on the BBC this morning “The reason is no government regulation. America is corruption-ridden since everything has been deregulated. The convicts have taken over the prison and have been robbing the system blind.”

    Fact is – hundreds of billions of dollars have evaporated. And thousands of senior – and not so senior – employees are today out of work.

    In the UK their homes are worth 30% less than they were 6 months ago.

    There’s a foolish theory circulating that Barbados is immune to melt-downs like this. That the very rich will always buy $5,000,000 beachfront condos.

    Trouble is the “very rich” are quaking in their boots today – wondering where they can get enough to pay an instalment on their mortgage and yacht.

    Maybe out there there’s a Bajan banker with big enough cojones to tell us how much our local banks have lost through foolish investments in this worst financial scam since the Great Depression.

  14. Green Monkey Avatar
    Green Monkey

    To see why our current banking and economic systems require endless growth and are therefore fundamentally unsustainable watch the video Money As Debt.

    You can watch it on line here:
    http://www.brasschecktv.com/page/135.html

    Or purchase it from the web site:
    http://moneyasdebt.net/

  15. David Avatar
    David

    @Anonymous

    We will take your feedback as a compliment. To compare BU, a humble household to the Nation on Fontebelle, with their limitless resources qualifies. Often times we are sent articles by members of the BU family to develop a blog around to provoke discussion. There are some core issues we have a comfort level but finance it not one of them. This is where the BU family comes to the rescue as you would have seen from the above.

    Secondly we want to thank the above commenters for assisting BU to crystallize the linkages for our friend Anonymous. We thought that our reference to an imminent Wall Street meltdown would provide the obvious conclusions to be made.

    Thirdly, the financial disaster as some above mentioned is clearly linked to the housing disaster (mortgage backed securities) and lack of regulatory oversight. From reading the analysts reports the housing meltdown has not bottomed out yet. This being the case it means that the assets of many financial institutions are reducing as we write!

    Anonymous, Mortgage Backed Securities are/were traded by security firms all over the world i.e.across markets. The Wall Street meltdown is not a US problem it is a global problem.

    Fourthly we were watching Blomsberg this morning and the forgotten point was made-with most stock markets around the world losing points, China and the cash rich Asian countries have been buying gold like crazy. US because of its trillion dollar debt will be left cap in hand, i.e.their debtor status will escalate.

    Finally, the uncertainty in the world’s financial markets will do just what other commenters above have stated. Fear will be the order of the day. What does a frighten investor do, the ones that buy million dollar condos for leisure in Barbados?

    Hope that the linkage has been made for you Anonymous?

  16. Chris Halsall Avatar
    Chris Halsall

    @Green Monkey: “Traditional, free-market capitalism is built fundamentally on a flawed premise – that you can have perpetual, endless, infinite growth in a finite world.”

    With respect GM, I don’t entirely agree with your statement.

    While the “traditional” implementation may rely on infinite growth, free-market capitalism does not have to. In my opinion, our current implementation is a temporary distortion of free-market economics.

    I personally find it useful to model markets as ecosystems. Thus, the same principles which apply to the world’s biosphere (or a simple garden) also apply.

    Ecosystems do *not* have to have infinite space to survive. When confronted with a finite space, they simply and naturally converge to a stable, and optimally efficient, equilibrium.

    And this is the issue with today’s “Me! Me! Me!” attitude. There’s not a lot of *profit* (read: money; read: wealth) in a stable, and optimally efficient, equilibrium….

  17. Avatar
    Anonymous

    i think its a good article bajans need to wake up and think

  18. Adrian Hinds Avatar
    Adrian Hinds

    @Chris Hasell
    I agree with you. Even the Money as Debt talks about alternatives to the fractional systems todays banks use, and that many point to as indicative of the need for continuous growth. Unbriddle greed can be managed by a series of methods and approaches. What will the anti-capitalist replace capitalism with?

  19. Adrian Hinds Avatar
    Adrian Hinds

    I also think it is a good article. Just the other day i was reading about Barbadians in over their heads in debt. Bajan too need to understand how new money is created. Maybe if they did, they would be less incline to be used to enrich others.

  20. Chris Halsall Avatar
    Chris Halsall

    @Krzysztof Skubiszewski: “Trouble is the “very rich” are quaking in their boots today – wondering where they can get enough to pay an instalment on their mortgage and yacht.”

    With respect kind sir, you are wrong.

    The “very rich” are viewing the current situation as a (God given?) opportunity. They are appropriately diversified, and they have the resources to invest in opportunities.

    The “just rich”, the “middle class”, and the “poor” are those who are in panic mode.

    Guess who’s going to come out ahead?

  21. politically incorrect Avatar
    politically incorrect

    Chris Halsall:

    Guess who’s going to come out ahead?

    Certainly NOT the rank and file Bajan.

    That’s the point BU is making.

    It’s time to wake up and smell the coffee folks.

  22. Straight talk Avatar
    Straight talk

    Chris Halsall:

    You are reiterating the point I have been trying to convey for months.

    The financial system is working perfectly well, thank you, at least for those who designed it, and are currently manipulating it to their own benefit.

    Financial meltdown may be a disaster for some, but the ideal opportunity for the Rothschilds and Rockefellers who, in collusion with their controlled entities, the World Bank, IMF, Morgan Grenfell and , yes, a benign US administration, are now in a similar position to mop up the wreckage for cents on the dollar, just as they did 80 years ago.

    The losers of course are the hard working, but gullible, majority who believed their Ponzi schemes and suspended logical reasoning whilost accepting the dream of financial security by “prudently” trusting their financial future to the whizz-kid experts.

  23. Adrian Hinds Avatar
    Adrian Hinds

    Geopolitical Diary: Measuring the Danger
    September 16, 2008 | 0157 GMT
    A major U.S. company declared bankruptcy on Monday, and another even larger company in the same industry that had come on hard times was bought by a yet larger company. We state the news on Lehman Brothers and Merrill Lynch & Co. in order to put this in context. American companies come and go, with catastrophic results at times for employees, shareholders, lenders and the general public. Enron, WorldCom, Digital Equipment Corp., Prime Computer and Data General were all major companies — some were household names. Their industries fell on hard times and redefined themselves, leaving shattered companies and lives in their wake.

    Clearly the financial industry is in great trouble in the United States. Capitalism solves those problems by annihilating weak companies and clearing space for others to grow and for new companies to emerge. There is a term for this: “creative destruction.” It embodies the argument that, without the destruction of outmoded businesses, progress is impossible. It is interesting how badly damaged the old line brokerages have been. Merrill Lynch is an American institution that brought the stock market to the masses. Now something else will fill that space. If we knew what it was going to be, we’d be rich.

    When this sort of activity occurs in the computer industry, or the dot-coms, hundreds of billions of dollars are lost. Lives are ruined and former paper billionaires look for jobs as programmers. When it happens in the financial industry, there is another concern. When Enron failed, many financial institutions shuddered and an accounting firm went down with it. When a financial institution fails, the deeper connections with other financial houses raise concerns about a ripple effect. Particularly given the daisy chain of leveraged debt, the fear is that the failure of one firm can trigger a chain reaction throughout the system. That may be true, but it is equally true that an Enron can undermine financial institutions and cause an uncontrolled chain reaction.

    Of course, that didn’t happen. It is not clear that the failure of Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers and Merrill Lynch will cause such a chain reaction, either. One reason is the Federal Reserve, which is intervening in critical cases to dampen the effect. It is noteworthy that it did not intervene for Lehman Brothers, apparently calculating that the impact would not justify the effort.

    From our point of view, the question is whether these failures will destabilize the United States sufficiently to affect the international system. We are simple folks and we look at simple things. The Standard & Poor’s 500 Index is down about 20 percent from its all-time high. The normal decline prior to a recession is substantially greater, and given Monday’s news, the situation could be much worse. A liquidity crisis increases the price of money, and yet interest rates remain low. That suggests we are not seeing a liquidity crisis, but simply an unwillingness to lend to firms that are failing. Most healthy companies outside the financial sector are securing financing, but the standards have tightened. That’s what is supposed to happen in an economic slowdown. Unemployment has risen, but nowhere near the dramatic numbers seen in the 1970s and early 1980s.

    The financial industry is in enormous trouble. The financial system is certainly not experiencing the same pain as a Lehman Brothers employee is. It is not as well off as two years ago, but it is far from extreme straits. The economy has also slowed, but it is not clear that the economy is even in recession. The definition of a recession is simple: the economy contracts. If it does not contract, it may be slowing down, but that is not the same as a recession. At this point there is not yet confirmation that there is even a mild recession — although, as we have said before, it is about time to have one, since we are about seven years since the last one and recessions are necessary correctives.

    The only thing we can conclude from the data is that a lot of companies in the financial industry are in deep trouble, that the financial system itself is in much less trouble than this industry, and that the economy is doing fairly well, considering that it is probably heading into recession. The recessions of 1991 and 2001 came and went, and life went on. In spite of the horrific headlines in the press we see no reason to change that view. We would hate to be an employee of a brokerage house right now, but the United States has weathered much worse and it seems to us that the international balance of power will not shift. Certainly, if the numbers change dramatically, then so will our view. But we are struck by how much worse the numbers would have to get for us to re-evaluate our fundamental view.

    It was terrible to be a mainframe computer manufacturer in the 1980s. It was awful to own an Internet company in 1999. And it is terrible to be in the financial industry today. That is not the same as the collapse of civilization as we know it.

  24. Straight talk Avatar
    Straight talk

    GOP unsupportable oily propaganda.

    Check out the facts.

    By yesterday’s benchmarks Lehman Bros was solvent, by today’s revaluation of the Credit Swap market every single financial institution has had their assets marked down by a similar amount and are therefore just as vulnerable.

  25. Chris Halsall Avatar
    Chris Halsall

    @Adrian Hinds… Thank you (I guess) for your cut-and-paste of 2008.09.16@1410.

    Just two questions:

    1. Can you please provide the URL to the language you posted?

    2. Do you have anything to say with regards to this cut-and-pasted language?

    Specifically, do *you* have anything of value to bring forward with regards to the matter at hand?

  26. notesfromthemargin Avatar
    notesfromthemargin

    David,

    We asked a similar question some time ago.

    http://notesfromthemargin.wordpress.com/2007/11/19/is-the-barbados-property-market-a-bubble/

    keep up the good work.
    Marginal

  27. David Avatar
    David

    @Adrian

    The author of that article seriously underestimates the current housing spiral and the mortgage backed securities component.

    Remember that mortgage backed securities were traded in the major stock markets i.e this mess has global fallout.

    Of interest to BU is the extent of this financial infection in the USA. Given the kind of high profile companies to have fallen so far we don’t want to imagine the kind of credit risk used by the lesser financial companies.

  28. Adrian Hinds Avatar
    Adrian Hinds

    David // September 16, 2008 at 3:20 pm

    @Adrian

    The author of that article seriously underestimates the current housing spiral and the mortgage backed securities component.

    Remember that mortgage backed securities were traded in the major stock markets i.e this mess has global fallout.

    Of interest to BU is the extent of this financial infection in the USA. Given the kind of high profile companies to have fallen so far we don’t want to imagine the kind of credit risk used by the lesser financial companies.
    Leave a Comment
    ===========================
    First let me say that the article in question is from http://www.stratfor.com. David could you please add this to the article so as to satisfy those who would want to suggest, an act of plagiarism on my part.

    ……The authors makes two points.
    1: that the economy is due for a correction. We have not had one in seven years, due to the constant tinkering of the government.

    2: That the recession of 1999 and 2001 came and went and life continues inspite of the headlines back then.

    3:That other large American companies have failed in the past.

    4: The author acknowledges the difference between financial firms and the failed companies mention, by highlighting the impact that linkages of leverage debt to other firms can have verses past failures in US history.

    Liquidity is not an issue, the feds have kept interest rates at 2 % and the stock market has responded positively.

    What the problem is the unwillingness to lend to firms and individuals with questionable financial papers and assets, but their is money out there. My house is still valued above what i paid for it althought it is much lower than a year ago, and as a result i am still getting calls to refinance, to get lines of credit base on equity in the property, because at the core of the current system more debt on my part means more money for someone else. If anything else it would be greed and the risk to make a profit as someone eluded to that will prompt other companies to buy up the assets of Lehman brothers on the cheap.

  29. Adrian Hinds Avatar
    Adrian Hinds

    Does anybody know what the fallout of the Japanese economy cause around the world, or even regionally (asiaPac)? Does anyone know if the Japanese economy has recovered? what measures were tried to resusitate it? where they successfull? is there a viable comparison between the causes for the Japanese economic slide of the 90’s i believe and what is occuring in the US today? If so are they lessons to be learned?

  30. Adrian Hinds Avatar
    Adrian Hinds

    Straight talk // September 16, 2008 at 2:37 pm

    GOP unsupportable oily propaganda.

    Check out the facts.

    By yesterday’s benchmarks Lehman Bros was solvent, by today’s revaluation of the Credit Swap market every single financial institution has had their assets marked down by a similar amount and are therefore just as vulnerable.
    ==========================
    Yuh know i share your view of the power that Bankers/moneychagers have over our collective economies, but if you are of the view that what we are experiencing todate in the US is earth shattering i may not hold that view just yet. I have some exposures to the cycical values of public companies that trade on and in the stock market although i have a managed diversified investment account (it small). So like Lehman brothers i too have financial assets that have lost significant value thereby affecting my net wealth. Fortunately for me i live meagurely and still appreciate the value of “throwing a meeting” and keeping a few coppers under de bed. So that my declining net wealth has not as yet led to a liquidity problem where i cannot meet my monthly fixed and flexible debt obligations, and i don’t have a debt to income ratio that would make me an unattractive borrower in todays stringent lending market that i could not source a loan to tie me over if needed. Under the current system, remember entering a debt obligation on my part puts money in someone else’s pocket. My intent is deny that someone that opportunity as best i can and to present myself as a good credit risk if the need arises.

  31. Chris Halsall Avatar
    Chris Halsall

    @All…

    It has been said: “If you give some [people] enough rope, they will hang themselves.”

    While I was close to doing so, I find I no longer need to ask if anyone would like any more rope…

    Can we *please* get back to the matter at hand?

  32. Straight talk Avatar
    Straight talk

    and along with that, my point is proven

    Your money, and your future is tied up with some entity with which you have no control, their only consideration is added value, makingt he numbers , and collecting their bonus.

    Please convince me AH this is not what is happening to working and middle class investors.

  33. Straight talk Avatar
    Straight talk

    The matter in hand is that with the coming financial meltdown Barbados will have to re-adjust to the new reality.

    No mass market pouring off American. Virgin, BA, BMI.

    All our popular carriers planes will be converted to First Class.

    Only the top 3% of earners will be able to afford the price to our rock.

    They will not need hotels and condos, these, after their abject failure, will be bought out at bargain basement prices to be private retreats of the super rich.

    Barbados will survive, we have so much to offer, but only if its focus changes.

    If we don’t adopt high end service as a base level requirement, we will be by-passed

  34. Adrian Hinds Avatar
    Adrian Hinds

    Straight talk // September 16, 2008 at 5:19 pm

    and along with that, my point is proven

    Your money, and your future is tied up with some entity with which you have no control, their only consideration is added value, makingt he numbers , and collecting their bonus.

    Please convince me AH this is not what is happening to working and middle class investors.
    ===========================
    I cannot. You are right. But working and middle class investors can mitigate their exposure to debt accumulation by doing without. We spend to much. Global demand…well certainly American demand for gasoline drop significantly as a result of the high prices, it had to fall. We can collectively do the same in other areas, and thereby force a change to the current system. What is your approach?

    …..to whom it may concern. Joe Biden was accused of plagiarism back in the 80’s for quoting Niel Kinnick without attribution. The fact that he did so once out of the many many times he properly accorded attribution did not matter to the bias and dishonest detractors. I have offered many articles written by Stratfor to this forum where i did identify the source. I do understand the feeble attempt by some to yet again draw attention to themselves. They are still on my short list of suspected losers from north America who have found there way to the Caribbean to attempt bedazzlement of the natives with their intellect and wizardry.

  35. Chris Halsall Avatar
    Chris Halsall

    @Hinds: “They are still on my short list of suspected losers from north America who have found there way to the Caribbean to attempt bedazzlement of the natives with their intellect and wizardry.”

    If I May… That’s really funny…

    @Hinds… Care to go on the record with all of us here on BU: Where do you live and work?

    For the record (and perhaps being presumptuous, but)… I’m a Bajan. And I live and work in Barbados…

  36. Hants Avatar
    Hants

    @ A word of caution

    Warren Buffet does not own AIG Insurance
    .
    He owns Geico.

  37. Hants Avatar
    Hants

    @ A word of Caution.

    Both Lehman brothers and AIG have apparently been asking Buffet to help them.

    He apparently turned down Lehman and is thinking about helping AIG.

  38. Adrian Hinds Avatar
    Adrian Hinds

    U.K.’s Barclays to Acquire
    Lehman’s Investment Bank,
    Capital-Markets Businesses

    http://online.wsj.com/article/SB122156586985742907.html

    ————————————————-

    Fed Plans $85 Billion Rescue for AIG
    Shares Swing on Speculation About Aid; Worries Grow Over Private Sector Solution

    http://online.wsj.com/article/SB122156561931242905.html?mod=article-outset-box

    ———————————-
    and for good measure the Feds most recent press release and some parsing by WSJ

    http://online.wsj.com/mdcapp/public/page/2_3024-info_fedparse_shell.html

    ——————————————
    Obama’s chances are increasing daily with these corporate bailouts, and the republicans continued holdout from offering a similar lifeline to the 4% of mortgage holders that are hurting. Corporations don’t vote, real people do.

    I expect UBL to make an appearance any day now, remember i strongly believe he is a republican. 🙂

  39. Chris Halsall Avatar
    Chris Halsall

    @Hinds…

    Please forgive me for this, but is there not an outstanding question directly to you from yours truly?

  40. Adrian Hinds Avatar
    Adrian Hinds

    Chris Halsall // September 16, 2008 at 8:16 pm

    @Hinds…

    Please forgive me for this, but is there not an outstanding question directly to you from yours truly?
    ===========================

    Chris i am very sorry for giving you the impression that i care to have a conversation with you. I now realize that it was a mistake to have hollered @ you this morning to let you know that i had agreed with some point you made. I can’t take that back but suffice it for me to now tell you that i am sincerely sorry for so doing. 🙂

    …..Who i am and where i live and work has been publish all over this forum, BFP and the Labour party blog, Pictures of me have also been included. I have even given out my cell number recently and to which i received a couple of calls from a few family members here, ….but because I believe it to be important that i never give appearances to doing anything you ask of me, I will refuse your request at this time. I will at a time of my choosing yet again disclose my location etc. Now i wish not to be bother by you, and so i will return to my September 15th position on you. 🙂

  41. Chris Halsall Avatar
    Chris Halsall

    @Hinds… [smile]

    Ah ha… I’m sorry to have wasted your (and more importantly, the BU Family’s) time…

    My deepest apologies to all…

  42. A word of caution Avatar
    A word of caution

    @ Hants

    You are correct and I stand corrected …Warren Buffet is not the owner of AIG…and I certainly would not want to deprive him of hundreds of millions from his 30 odd billion net worth. His exposure to AIG is actually through Bershire Hathaway’s subsidiary Gen Re which has in the past has done business with AIG. That is why I take it he was invited to assist in the bailout efforts. He is also on record as stating that the innovative financial instruments (derivatives etc) are financial weapons of mass destruction and has the potential to turn the US into a sharecropper society. We will see how right he is on this suggestion in months and years to come as the US starts to print money like crazy to solve this problem.
    ……………………………….

    Paul Volker, a former fed chairman on the US economy in 2005, – “Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. What really concerns me is that there seems to be so little willingness or capacity to do much about it.” An Economy On Thin Ice

    IMF Head: International Credit Crisis Is “Unprecedented” – CAIRO (AFP)–Dominique Strauss-Kahn, the head of the International Monetary Fund, said Tuesday the current international credit crisis was “unprecedented” but cautioned against panic. “We are facing an unprecedented financial crisis” because it stems from “the heart of the system,” the U.S., and not from its “periphery” and has affected the whole world simultaneously, he told AFP in French.
    …………………

    It must also be remembered that many of these international companies have offshore companies here….a sector that accounts for the a substantial part of our corporate taxes.

  43. David Avatar
    David

    ……The authors makes two points.
    1: that the economy is due for a correction. We have not had one in seven years, due to the constant tinkering of the government.

    You talk about a correction as if it were a walk in the park. While it is accepted that the dynamics of a financial market will make corrections from time to time, the question still must be asked: could the size of this correction have been avoided?

    2: That the recession of 1999 and 2001 came and went and life continues in spite of the headlines back then.

    This is true, life will continue, define life?

    3:That other large American companies have failed in the past.

    Can’t despite that but what is the point you are making? All failures in the present can be justified in the past? If we compare the failures of today to the past what are the similarities?

    4: The author acknowledges the difference between financial firms and the failed companies mention, by highlighting the impact that linkages of leverage debt to other firms can have verses past failures in US history.

    This is the most crucial part of the observation by the author in our opinion which merits more explanation.

    On another note we heard the Governor of the Central Bank of Barbados assuring Barbadians that it will be several months to determine if there will be an impact on Barbados. We also heard Richard Francis who is with one of the rating agencies, we think Standards & Poors feeding VOB the usual mumbo jumbo. Our view is that players want to maintain calm.

  44. The scout Avatar
    The scout

    Minister Michael Lashley can hold strain for a little while. Just now these West coast condos would have to be rented to middle class bajans at an affordable price, which would make the now rented apts cheaper and more available to the average bajan. After the building boom comes the real BOOOOOOOOM.

  45. David Avatar
    David

    Adrian H we know that you are an advocate of unbridled capitalism and free market. What is your view on the AIG 85 billion dollar bailout. A strange twist to the capitalist model?

  46. Adrian Hinds Avatar
    Adrian Hinds

    David // September 17, 2008 at 8:36 am

    Adrian H we know that you are an advocate of unbridled capitalism and free market. What is your view on the AIG 85 billion dollar bailout. A strange twist to the capitalist model?
    ===========================

    No No David do not try,….as you cannot possibly substantiate your attempted lable of me as an advocate of UNBRIDLED capitalism, and free markets. UNBRIDLED is unrestraint, and or uncontolled which strikes against my believe that a good life calls for balance. I don’t know of any good thing that can remain good when in it’s extreme.

    …..The structure of the AIG bailout which is in the form of a LOAN, and the owenership of 80% of AIG assets with the possibility to profit from them is a good thing. The problem i have with the republicans and that i think Obama and the democrats can benefit from is the unwillingness to lend a helping hand to hurting families with their mortgages.

    Uh mean how can it be said that the core reason to this crisis is the subprime mortgages, agreed to by average people and they are being left by the wayside and our government can feel justified in helping the issuers and backers of said mortgages?????? Corporations don’t vote real people do.

    However i think you are confusing capitalism with the financial system we have. We can have capitalism trading in goal instead of paper dollars or with paper backed by gold instead of paper by fiat and good faith, or with paper back by paper and good faith, without the fractional reserve system that allows a bank to lend up to 8 or 9 times the amount of money it has in reserve.

    You must find the time to watch Money as debt, and the money chagers to understand what is going on. I watch them both at least once a week, and i am still learning new things.

  47. Adrian Hinds Avatar
    Adrian Hinds

    David // September 16, 2008 at 11:53 pm

    ……The authors makes two points.
    1: that the economy is due for a correction. We have not had one in seven years, due to the constant tinkering of the government.

    You talk about a correction as if it were a walk in the park. While it is accepted that the dynamics of a financial market will make corrections from time to time, the question still must be asked: could the size of this correction have been avoided?

    2: That the recession of 1999 and 2001 came and went and life continues in spite of the headlines back then.

    This is true, life will continue, define life?

    3:That other large American companies have failed in the past.

    Can’t despite that but what is the point you are making? All failures in the present can be justified in the past? If we compare the failures of today to the past what are the similarities?

    4: The author acknowledges the difference between financial firms and the failed companies mention, by highlighting the impact that linkages of leverage debt to other firms can have verses past failures in US history.

    This is the most crucial part of the observation by the author in our opinion which merits more explanation.

    On another note we heard the Governor of the Central Bank of Barbados assuring Barbadians that it will be several months to determine if there will be an impact on Barbados. We also heard Richard Francis who is with one of the rating agencies, we think Standards & Poors feeding VOB the usual mumbo jumbo. Our view is that players want to maintain calm.
    ===========================

    Whomever told you that life has ever been or will ever be a bed of roses lied to you.

  48. Adrian Hinds Avatar
    Adrian Hinds

    as i said last night @ 7:59pm

    “I expect UBL to make an appearance any day now, remember i strongly believe he is a republican. :)”

    We learned that Explosions Rock U.S. Embassy in Yemen; 16 Killed, and the U.S. State Department Sean McCormack said that the sophisticated attack “bears all the hallmarks of an AL QAEDA ATTACK.”

    http://www.foxnews.com/story/0,2933,423823,00.html

  49. Adrian Hinds Avatar
    Adrian Hinds

    I like this article:

    September 17, 2008
    Economic Scene
    Perhaps, It’s Time to Play Offense
    By DAVID LEONHARDT
    WASHINGTON — Late last week, as Lehman Brothers was collapsing, an all-star group of economists was meeting here to ponder the lessons of the financial crisis. The group included Donald Kohn, the vice chairman of the Fed, and Edward Lazear, the top White House economist, as well as Lawrence Summers, the former Treasury secretary, and a few dozen others.

    The discussion revolved around a handful of academic research papers, but it really boiled down to this: How do we get out of this mess?

    At one point, Benjamin Friedman of Harvard raised his placard to inject a little sunshine into the room. If somebody had told the economists a year and a half ago what was about to befall Wall Street and then asked them to predict the economic impact, Mr. Friedman said, they almost certainly would have forecast a steeper downturn, with many more layoffs, than has occurred.

    The fact that it hasn’t, so far, should be considered a victory for Ben Bernanke and Henry Paulson, the point men on the crisis. After some early missteps, they have acted aggressively to keep the financial system functioning — including Tuesday’s stunning takeover of A.I.G. — while still forcing Wall Street to suffer for its sins. The problem, unfortunately, is that neither man has done much to deal with the problems that caused the crisis in the first place.

    For the past two and a half months, I’ve been on a break from column writing, and I’m struck by how much has changed during that time — and yet how little the big picture has changed. Lehman Brothers, Merrill Lynch, Fannie Mae and Freddie Mac have all essentially collapsed. But just as at the start of the summer, economists can’t even agree whether the country is in a recession.

    The Bush administration, the Fed and Congress, meanwhile, continue to focus on the immediate crises, with little attention to the underlying reasons that the economy has gotten into this mess — a stagnation of incomes, an explosion of debt and a decidedly outdated, and limp, approach to government oversight. Remarkably, the presidential campaign has gotten less serious, while the economy’s problems have become more so.

    So, yes, Mr. Bernanke and Mr. Paulson have done a nice job of playing defense. But when will someone start playing offense?

    •

    A good way to see the problems with a fingers-in-the-dikes strategy is to look back to the first big bailout of modern times. Before A.I.G., before Fannie and Freddie, before Bear Stearns, there was Chrysler.

    In 1979, when it was still the 10th largest company in the country, Chrysler found itself on the verge of collapse, largely because high oil prices had made its gas guzzlers unappealing. Company executives and union leaders came to Washington, hat in hand, arguing that Chrysler’s demise would wreak unacceptable damage on the American economy. Congress and the Carter administration responded by arranging for $1.2 billion in subsidized loans. The Reagan administration helped further in 1981 by restricting Japanese imports.

    On its face, the Chrysler rescue was a huge success. Under Lee Iacocca, the company came out with the K-car line of smaller vehicles, like the Dodge Aries, as well as the original minivan. By the mid-’80s, Chrysler had repaid the loans. Mr. Iacocca appeared on the cover of Time magazine as “Detroit’s comeback kid,” and his autobiography became a No. 1 best seller.

    You can draw a clear line from the Chrysler bailout to the recent attempts to steady Wall Street. Back then, Washington insisted on a few pounds of flesh, like a wage freeze for Chrysler workers, in exchange for aid. Mr. Paulson has done something similar by insisting that shareholders of the Wall Street firms benefit little from any bailout.

    In 1979, the government structured the Chrysler deal so that taxpayers might earn a profit from it (which they did). This year, the Fed effectively purchased securities from Bear Stearns that it hopes to sell for a gain when the financial markets calm down. While it’s way too early to know if the strategy will succeed as well as it did three decades ago, it’s certainly conceivable.

    But if you take a moment to think through the full Chrysler story, you start to realize that it’s setting a really low bar. The Chrysler bailout may have saved the company, but it did nothing, after all, to stop Detroit’s long, sad decline.

    Barry Ritholtz — who runs an equity research firm in New York and writes The Big Picture, one of the best-read economics blogs — is going to publish a book soon making the case that the bailout actually helped cause the decline. The book is called, “Bailout Nation.” In it, Mr. Ritholtz sketches out an intriguing alternative history of Chrysler and Detroit.

    If Chrysler had collapsed, he argues, vulture investors might have swooped in and reconstituted the company as a smaller automaker less tied to the failed strategies of Detroit’s Big Three and their unions. “If Chrysler goes belly up,” he says, “it also might have forced some deep introspection at Ford and G.M. and might have changed their attitude toward fuel efficiency and manufacturing quality.” Some of the bailout’s opponents — from free-market conservatives to Senator Gary Hart, then a rising Democrat — were making similar arguments three decades ago.

    Instead, the bailout and import quotas fooled the automakers into thinking they could keep doing business as usual. In 1980, Detroit sold about 80 percent of all new vehicles in this country, according to Autodata. Today, it sells just 45 percent.

    There is a similar chance for us to be fooled about the extent of today’s problems. Some day, house prices will stop falling and the financial markets will calm down. But the underlying problems aren’t going away on their own.

    At its core, the current crisis stems from two problems. Regulators, starting with Alan Greenspan, assumed that a real estate bubble couldn’t happen and that Wall Street could largely police itself. And households, struggling with incomes that haven’t kept up with inflation in recent years, said yes when those lightly regulated banks offered them wishful-thinking loans. No bailout can solve either problem.

    The past week has offered a glimmer of hope that the policymakers want to get beyond short-term fixes. Mr. Paulson drew the line at Lehman Brothers last weekend, refusing to save it from bankruptcy. On Tuesday, the Fed kept its benchmark interest rate steady, rather than pretending that ever-cheaper borrowing was a cure-all.

    Now should come the harder part: a much more serious attack on our economic problems. Earlier this week, I called Mr. Hart, who has written some thoughtful things about the economy lately, for his take on all this. “We’ve been consuming more than we’ve been producing. We’ve been spending more than we’ve been earning,” he told me. “It’s been a big holiday.”

    His list of solutions is a pretty good one. The tax code, he said, should be changed to reward savings far more than consumption. The resulting savings would help families prepare for retirement — and also become a pool of money that companies could invest in productive ways. The federal government should lend a hand, by investing in areas like basic science and technology, which could, in turn, help create more good-paying jobs than the economy has been able to create recently. The government also needs to bring down Medicare costs, which is the key to solving its long-term budget deficit.

    That’s one path. Another would be to add to the deficit by paying for one bailout after another.

    Speaking of which, Detroit’s Big Three have come back to Capitol Hill lately, lobbying for billions of dollars in handouts. This time, their executives insist, they’ll use the money to solve their problems.

    Email: leonhardt@nytimes.com

  50. Chris Halsall Avatar
    Chris Halsall

    If I May…

    In my opinion, almost all of the above is absolutely complete and utter rubbish…

    This “crisis” was *planned*…

    Here’s the plan:

    1. Let’s lend to people who can’t afford to service their loan…

    1.1. Let’s give them a grace period where the interest rate is (temporarily) manageable.

    1.2. Let’s encourage them to go in *way* past where they can actually afford.

    1.3. Let’s then “call the loan”. “Hey, they signed the paper saying they could pay for this.

    2. Let’s start charging market rates…

    2.1. Hey! Look at that. Most of those who have contracts with us can’t afford to pay. Imagine that…

    2.2. Whoops. Other lenders have had the same idea. Humm… While we can (and will) foreclose, we can’t actually flip the property for a profit, because we’ve destroyed the market…

    3. Hey, Government — guess what? We’ve f***ed up. But you know what? We’ve invested the expected (but unrealistic) upside in other commodities…

    3.1. Bail us out, or your stock markets are going to collapse…

    The immediate above might be considered cynical. IMHO, it is also accurate…

    I’m more than happy to be proven wrong, but I don’t think that any of these “bail outs” are going to help the common mortgage holder — rather, they’re going to help the (opportunistic) mortgage provider.

    As in, even with these “bail outs”, the simple home owner will still lose their home. At the same time, the executives will continue to collect their bonuses…

    (As always, I’m more than happy to be proven wrong; and I hope someone does so…)

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