July 11, 2010

A sudden chill - a sense of foreboding

The second dip is manifest and it is on its way. From the New York Times:
Crisis Awaits World�s Banks as Trillions Come Due
The sovereign debt crisis would seem to create worry enough for European banks, but there is another gathering threat that has not garnered as much notice: the trillions of dollars in short-term borrowing that institutions around the world must repay or roll over in the next two years.

The European Central Bank, the Bank of England and the International Monetary Fund have all recently warned of a looming crunch, especially in Europe, where banks have enough trouble raising money as it is.

Their concern is that banks hungry for refinancing will compete with governments � which also must roll over huge sums � for the bond market�s favor. As a result, credit for business and consumers could become more costly and scarce, with unpleasant consequences for economic growth.

�There is a cliff we are racing toward � it�s huge,� said Richard Barwell, an economist at Royal Bank of Scotland and formerly a senior economist at the Bank of England, Britain�s central bank. �No one seems to be talking about it that much.� But, he added, �it�s of first-order importance for lending and output.�
We're all Keynesians now... Yeah... Right... Just as the US Commercial Real Estate borrowing bubble is about to crash. In Bellingham, in the mall, there are a lot of vacant storefronts and several mega-stores that are boarded up. In the 7K mile road trip I took recently, there were lots of smaller towns with boarded up malls. Get out of debt, pay cash, hunker down and prepare to wait it out for another three to five years. Things will get better again, this is just the unfortunate confluence of several national and global bubbles that happened when we had an incompetent hand at the wheel. Things will get better but hunker down for now. Posted by DaveH at July 11, 2010 11:02 PM
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