Did anyone predict the sub-prime crisis and international credit freeze?

Hi Superman

That is a very clever and interesting site.

But a lot of people predicted the collapse of the housing bubble.

The other links mentioned earlier actually highlighted the sub-prime crisis and the securitization of sub-prime loans.

Brendan
 
Hi Duke

Another interesting document. It does seem that the Financial Regulator has been very conscious of the possibility of a run on a bank. I put down a motion of no confidence in Michael Fingleton 5 years ago and the Central Bank stopped it on the grounds that even discussing it might cause a run on the Irish Nationwide. At the time, I thought that this was ridiculous. Now I can see their point. Although the risk was remote, if it did cause a run, the effects could have been disastrous.

I wonder if interbank lending has ever frozen before? If so, then the regulators worldwide should have had a plan for it.

Brendan
 
Brendan said:
I wonder if interbank lending has ever frozen before? If so, then the regulators worldwide should have had a plan for it.
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It has happened in any number of the currency crisis economies - Argentina, Thailand, Korea, Indonesia etc.

It also happens in countries where property bubbles burst - Finland and Sweden being our nearest neighbours where the banking system effectively had to be rebuilt through: guarantees, capital supports, nationalisation, a national 'bad' bank depending on how bad the individual bank was.

An additional problem with this crisis is that a lot of transnational banks are bigger than their home governments.
 
In 2006, in "The Black Swan", Nicholas Taleb wrote:
Globalization creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words it creates devastating Black Swans. We have never lived before under the threat of a global collapse. Financial Institutions have been merging into a smaller number of very large banks. Almost all banks are interrelated. So the financial ecology is swelling into gigantic, incestuous, bureaucratic banks – when one fails, they all fall. The increased concentration among banks seems to have the effect of making financial crisis less likely, but when they happen they are more global in scale and hit us very hard. We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogeneous framework of firms that all resemble one another. True, we now have fewer failures, but when they occur ….I shiver at the thought.
​
The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup. But not to worry: their large staff of scientists deem these events "unlikely".

​
 
seemingly the old brush over predicted it...Donald Trump - wonder are his bankers sweating these days with all his NY real estate and casinos!!
[broken link removed]
 
Brendan said:
Lots of people predicted house price falls and crashes. But did anyone predict the following sequence:

1) Widespread, massive sub-prime lending in America
2) Widespread, massive defaults on these loans
3) Massive write-offs by American and European banks on secutised products.
4) Collapses in international banks
5) Banks refusing to lend to each other?

People did predict that banks would reduce the credit to borrowers, but did anyone predict the collapses?

Obviously, links to these predictions would be preferable to "I saw it coming" remarks.
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A guy called Peter Schiff saw the troubles in the US economy way back in 2006. The following video has turned out to be extremely accurate and is definitely worth watchin:

http://au.youtube.com/watch?v=LfascZSTU4o
 
I do not think anyone could have predicted the downturn we saw personally. It is completely unprecendented and largely based on negative sentiment and also people applying for mortgages they could not afford in the long term. It is simply people following the crowd and you cannot predict this, this is called chaos theory. The only people who will profit from this kind of discussion are the doom and gloom merchants. People from the media will only use such discussion for their own aims.
 
charliemacck said:
I do not think anyone could have predicted the downturn we saw personally.
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Except they did - read some of the posts above.
It is completely unprecendented
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No it isn't - look at Japan, Finland, Sweden, Hong Kong, Korea, Iceland...
and largely based on negative sentiment and also people applying for mortgages they could not afford in the long term.
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So which is it? Sentiment or unaffordable debt? One is fluffy and unpredictable; the other is subject to analysis and its outcomes are predictable.
It is simply people following the crowd and you cannot predict this, this is called chaos theory.
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Again, you are contradicting yourself. Chaos theory is deterministic - predictable, so either you can predict it or you cannot. Make up your mind.
The only people who will profit from this kind of discussion are the doom and gloom merchants. People from the media will only use such discussion for their own aims.
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:rolleyes:
 
yoganmahew said:
Except they did - read some of the posts above.
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Brendan has been quite clear in this thread that noone could have foreseen the exact events. Just crying wolf constantly is very different. Anyone can do that. The financial experts in this forum did not see this coming.

No it isn't - look at Japan, Finland, Sweden, Hong Kong, Korea, Iceland...
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Why do people keep saying Ireland is like these countries? We are very different from them. Why are you comparing us to communist dictatorships?
 
charliemacck said:
Brendan has been quite clear in this thread that noone could have foreseen the exact events. Just crying wolf constantly is very different. Anyone can do that. The financial experts in this forum did not see this coming.
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:D Now you're just having a laugh.

The point about 'crying wolf' that you seem to have missed is that most of these people were warning about the risk of asset mispricing (bubbles) and the underpricing of risk. This is not 'crying wolf', this is identifying a danger. The logical consequences of the risk (which some of the commentators spelled out) are the bursting of asset bubbles, a credit shock, severe stress for the financial system, a bleed over from this into debt-laden consumers, resulting in a severe recession in the real economy.

Why do people keep saying Ireland is like these countries? We are very different from them. Why are you comparing us to communist dictatorships?
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Er, which communist dictatorship in the list I gave would that be? What you should be asking yourself is why should Ireland be different? What law of financial gravity doesn't operate here that operates everywhere else?
 
yoganmahew said:
:D Now you're just having a laugh.

The point about 'crying wolf' that you seem to have missed is that most of these people were warning about the risk of asset mispricing (bubbles) and the underpricing of risk. This is not 'crying wolf', this is identifying a danger. The logical consequences of the risk (which some of the commentators spelled out) are the bursting of asset bubbles, a credit shock, severe stress for the financial system, a bleed over from this into debt-laden consumers, resulting in a severe recession in the real economy.
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As The Boss says, lots of people cryed word but noone actually could have forseen the sequence of events, are you disagreeing with his opinion. At the time noone considered these assets overpriced we were told that Ireland had sound fundamentals. I still believe this is the case and that much of the negative growth we have seen is in peoples minds. We just need to pull together and help out those in trouble at this time.

And the communist dictatorship I am referred to is of course Korea.
 
charliemacck said:
As The Boss says, lots of people cryed word but noone actually could have forseen the sequence of events, are you disagreeing with his opinion. At the time noone considered these assets overpriced we were told that Ireland had sound fundamentals. I still believe this is the case and that much of the negative growth we have seen is in peoples minds. We just need to pull together and help out those in trouble at this time.

And the communist dictatorship I am referred to is of course Korea.
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I doubt he meant North Korea somehow. Lots of people were saying assets were overpriced despite the fundamentals. I wasn't one of them and I was wrong. It was a bubble and they were right. What do you mean negative growth is in peoples minds? Thats just bizarre
 
charliemacck said:
And the communist dictatorship I am referred to is of course Korea.
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:rolleyes:
That's right, the two Kims have had many a housing bubble fueled by an easy credit policy... or cast your eyes south over the border to capitalist state with the 13th largest economy in the world...

So, tell me again how Ireland is different to all these countries. Apart from the people of course, with their sunny (sorry sunny) optimism in the face of disaster.
 
yoganmahew said:
:rolleyes:
That's right, the two Kims have had many a housing bubble fueled by an easy credit policy... or cast your eyes south over the border to capitalist state with the 13th largest economy in the world...

So, tell me again how Ireland is different to all these countries. Apart from the people of course, with their sunny (sorry sunny) optimism in the face of disaster.
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Brendan is a financial wizard a major shareholder and the brains behind a very successful financial website (as in this one). I think even you will admit this. And he did not see this chain of events. Can you tell me your qualifications and why you think you are smarter than him. Otherwise I think I will be paying more attention to his opinion on these matters thank you.
 
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