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Feb 18, 2009

Alan Greenspan gave an Economic Outlook speech that was shown on C Span.. here are his predictions.......

This is the most gloomy set of statistics he has ever seen in his lifetime. 
Predicting another 10 percent drop in home prices
Says global output is still in free fall, and will take time to recover as inventory that is in excess is sold or disposed of.. In other words, no recovery until this happens. 
No recovery until home prices stabilize.
3 month Libor bank to bank rate is 100 basis points where it should be 10. This is a worrying number... 
If interest rates keep going up, then recovery could be slowed down or stopped. 
Banks will need more bailout money before they can recover. 
Interest rates may increase if money supply is expanded, which is what is happening now, in my view. 
He said that banks used to have 50 of their assets in reserve, but this dropped steadily until now, when assets in reserve were very low. This caused the current crisis... 
In my words, he is saying that banks started gambling and spinning the Roulette Wheel since the 1980s, when money was leveraged about 40 times.. In other words 40 dollars were loaned out for every 1 dollar in deposits in the bank... When those forty dollars went bad and could not be collected, then there was nothing left in the bank to cover the bad loan... This is happening all over the globe, as toxic complicated loans were packaged and sold, after being mixed up with stocks, futures and other garbage that had no value by companies like the ones that recently had to go and get corporate welfare in order to survive. Taxpayers are now being asked to cover the bad debts of gamblers...
 
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Posted: Feb 18, 2009 4:35pm

 

 
 
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Good H.
, 1, 1 child
Santa Rosa, CA, USA
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