On 7/17/07, ken hanly <[EMAIL PROTECTED]> wrote:
So why when there is a crisis such as this impending does the stock market continue to rise? The US dollar is losing against most other currencies, the US is wallowing in debt and mired in costly wars with no end in site. There is a housing bubble collapsing but the market is flying high still.
This is a very good question. There is someone out there holding securities of very questionable value but unless someone sells, everyone can continue cooking the books and hiding their losses indefinitely and keep the boom going perhaps in another asset class. The rating agencies should get a lot of the responsibility for allowing this to happen. Some commentators have suggested that it is the Asian central banks who are being robbed blind by Wall Street. It is a cynical view but all too plausible. http://www.atimes.com/atimes/Global_Economy/IG14Dj01.html ---------------------snip The subprime banana skin has thus claimed a number of victims, including Asian central banks that are forced to hold billions in US dollar securities because of their currency manipulation that pushes up reserves. It almost seems poetic justice that the manipulators are given losses by the very people they think they are helping, namely over-consuming Americans. I believe that forced liquidation of many portfolios in Asia will create further losses, but American borrowers will emerge in essence unscathed from all this. Holders of mortgage securities do not have any claim on the underlying assets, only on the intermediate companies, which will of course declare bankruptcy, thus leaving empty shells for lenders to pursue. Unlike in previous crises such as that involving the telecom sector in 2002, most of the losses will be absorbed by central banks around the world rather than North American or European commercial and investment banks. This is one of the greatest robberies of our time, and it will go unreported in essence. Hard-working Asian savers will see their central banks post billions of dollars in losses on the US mortgage crisis in the next few years, but nothing can be done about it given the general lack of accountability across Asia.
