Torygraph: Looming crisis for the Fed.

WTF?_2

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/16/ccusdebt116.xml

Merrill Lynch has warned that the United States could face a foreign "financing crisis" within months as the full consequences of the Fannie Mae and Freddie Mac mortgage debacle spread through the world.

The country depends on Asian, Russian and Middle Eastern investors to fund much of its $700bn (£350bn) current account deficit, leaving it far more vulnerable to a collapse of confidence than Japan in the early 1990s after the Nikkei bubble burst. Britain and other Anglo-Saxon deficit states could face a similar retreat by foreign investors.

Beware..... the endgame is coming close for the insane low-interest rate policies of the Fed and GB is looking at similar problems. Get ready for massive devaluation/inflation or much higher interest rates to attract foreign cash for government bonds.... There won't be much of a middle ground.

moanymoany

I posted the link to the Peakoil article, I have also skimmed through the 48 pages of the full article. I (think) I now understand why is is not only demand that has raised prices. It is that the 'easy' oil has been taken, now it costs more and more to get every barrel of oil to the consumer.

There are oil fields where it is getting near to the point when it costs the same as a barrel of oil to get a barrel of oil out of the ground - that's when they stop.

This post shows another aspect of what seems to me to be an interlinked situation. Nothing affecting oil, housing, the economy and money can be taken in isolation. It is going to hit every country but the western countries with massive personal debts are going to suffer most. We are going to end up with more people that have to be supported by the state than most other countries in Europe. I cannot see how the massive debt can ever be repaid in the light of the price hikes in just about everything needed for life.

I hope that my belief of the size of this crash is wrong. Sadly, everything I read tells me I'm right. What scares me is the reporting of the situation on the tele. Don't these people live in the real world? I heard a BBC financial reporter saying that the Santander move on A & L was a sign that they thought there were big profits to be made in the British mortgage industry and it showed the 'correction' was nearly over!

GDB2222

We have had a period of around 30 years of very cheap oil. Hopefully, we can now wake up to the fact that oil is an expensive, polluting and depleting resource. In time, we can substitute other energy sources, such as wind power and (gulp) nuclear. We will adjust, but the period of adjustment may be very painful.

moanymoany

GDB2222 wrote: »

We have had a period of around 30 years of very cheap oil. Hopefully, we can now wake up to the fact that oil is an expensive, polluting and depleting resource. In time, we can substitute other energy sources, such as wind power and (gulp) nuclear. We will adjust, but the period of adjustment may be very painful.

And very long, probably decades.

Dithering_Dad

moanymoany wrote: »

Don't these people live in the real world? I heard a BBC financial reporter saying that the Santander move on A & L was a sign that they thought there were big profits to be made in the British mortgage industry and it showed the 'correction' was nearly over!

They probably spend more time in the 'real world' than people who spend their time obsessing about house prices, recessions and armageddon on this forum. Perhaps the reason the news isn't talking about the destruction of western society is because wont happen?

The oil story is old news - I remember all this during the 70's when I was a kid. The reality is that we invent new ways to extract oil from fields that were unprofitable in the past, we invent new technology to replace oil (such as hydrogen fuel cells, hybrid cars, etc) or we plant crops to replace oil, such as rapeseed, etc.

The housing market has fallen from a ridiculous height, a natural adjustment. Perhaps people think that they will just go up and up? People will adjust their lifestyles accordingly. Out of the window will go the new cars, holidays, designer clothes, large screen TVs. People will concentrate instead on debt repayment and necessities.

The banks going into meltdown. The larger ones will gobble up the smaller ones that have over stretched themselves. The bad credit will eventually be flushed from the system as people are forced to mend their ways - this is happening now, no more 100% mortgage and a return back to 3x salary lending.

We'll all have a period of financial hardship, and that's no bad thing. What won't happen in the destruction of Western Society.

adr0ck

there is more oil left in Canada than there has ever been taken out of the ground + what we have left in Saudi etc

its just more expensive

lostinrates

I remember being told at school when I was about 11 or 12 that there would probably be no accessable oil left by the time I was 21-25. I have always found it staggaring that imrpovements on alternative sorces of power and transport are so slow at coming though. Trasport is a huge factor on UK market with such a huge commuting population. Electric car progress is whispered about and prototypes of superior models surface and then disappear or are permanantly just about to appear but never do (and yes, I realise those batteries still need charging from siome source), hydrogen can't be mentioned in the same sentance without the words storage and flammable it seems. I don't know what the answer is, but I'm amazed that while there is new technology in tvs and mobile phones we simply have to have every year we can't get this progresing at the same rate.

adr0ck

lostinrates wrote: »

I remember being told at school when I was about 11 or 12 that there would probably be no accessable oil left by the time I was 21-25. I have always found it staggaring that imrpovements on alternative sorces of power and transport are so slow at coming though. Trasport is a huge factor on UK market with such a huge commuting population. Electric car progress is whispered about and prototypes of superior models surface and then disappear or are permanantly just about to appear but never do (and yes, I realise those batteries still need charging from siome source), hydrogen can't be mentioned in the same sentance without the words storage and flammable it seems. I don't know what the answer is, but I'm amazed that while there is new technology in tvs and mobile phones we simply have to have every year we can't get this progresing at the same rate.

we'll get there in the end

the increase in fuel costs now is probably helping us get there quicker

probably better to have a bit of pain now than a lot later on

slipthru

Dithering_Dad wrote: »

They probably spend more time in the 'real world' than people who spend their time obsessing about house prices, recessions and armageddon on this forum. Perhaps the reason the news isn't talking about the destruction of western society is because wont happen?

The oil story is old news - I remember all this during the 70's when I was a kid. The reality is that we invent new ways to extract oil from fields that were unprofitable in the past, we invent new technology to replace oil (such as hydrogen fuel cells, hybrid cars, etc) or we plant crops to replace oil, such as rapeseed, etc.

The housing market has fallen from a ridiculous height, a natural adjustment. Perhaps people think that they will just go up and up? People will adjust their lifestyles accordingly. Out of the window will go the new cars, holidays, designer clothes, large screen TVs. People will concentrate instead on debt repayment and necessities.

The banks going into meltdown. The larger ones will gobble up the smaller ones that have over stretched themselves. The bad credit will eventually be flushed from the system as people are forced to mend their ways - this is happening now, no more 100% mortgage and a return back to 3x salary lending.

We'll all have a period of financial hardship, and that's no bad thing. What won't happen in the destruction of Western Society.

I agree there will be no distruction of western society, I think a lot of people who are in there 30's or younger will not really know what it is like to live within there means, that is what is going to be interesting in the next few years.

Dithering_Dad

lostinrates wrote: »

I remember being told at school when I was about 11 or 12 that there would probably be no accessable oil left by the time I was 21-25. I have always found it staggaring that imrpovements on alternative sorces of power and transport are so slow at coming though. Trasport is a huge factor on UK market with such a huge commuting population. Electric car progress is whispered about and prototypes of superior models surface and then disappear or are permanantly just about to appear but never do (and yes, I realise those batteries still need charging from siome source), hydrogen can't be mentioned in the same sentance without the words storage and flammable it seems. I don't know what the answer is, but I'm amazed that while there is new technology in tvs and mobile phones we simply have to have every year we can't get this progresing at the same rate.

It's because oil is so damned cheap (if you ignore the tax our lovely government add onto it). I worked in Saudi and the guy I was working alongside told me that their problem is water, everytime they drilled a borehole looking for water, they'd find oil. The problem isn;t so much with finding the oil, its with pumping it out, refining and distributing it fast enough to keep up with demand.

As oil becomes increasingly expensive, it'll make more sense to start using these other technologies.

lostinrates

slipthru wrote: »

I agree there will be no distruction of western society, I think a lot of people who are in there 30's or younger will not really know what it is like to live within there means, that is what is going to be interesting in the next few years.

In that respect, and that respect alone, I think the house price increase has been personally beneficial. I'm scared of accruing costs of buying and selling somewher we will grow out of quickly, and even more scared of commiting to terrifying huge debts. Making choices to live with parents and rent for a roof, not make a 'status' choice of appartment has been prompted soley in order to save for our own home.

But then, I'm debt -phobic anyway (hence working through universit to minimise debt and other lifestyle choices)

BUT when most/many aren't working through university and getting huge debts I can see how you might feel like your in debt for a penny, might as well go for the pound. The generation before us have not been a fantastic example, IMO, but maybe thats a huge generalisation too?