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The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster
Sott.net ^ | 02/05/08 | Nouriel Roubini

Posted on 02/08/2008 9:22:07 PM PST by TigerLikesRooster

click here to read article


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1 posted on 02/08/2008 9:22:11 PM PST by TigerLikesRooster
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To: Uncle Ike; RSmithOpt; jiggyboy; Professional; 2banana; Travis McGee

Ping!


2 posted on 02/08/2008 9:22:53 PM PST by TigerLikesRooster (kim jong-il, chia head, ppogri, In Grim Reaper we trust)
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To: TigerLikesRooster

bttt


3 posted on 02/08/2008 9:28:27 PM PST by Pelham (Press 1 for English)
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To: TigerLikesRooster
In this meltdown scenario US and global financial markets will experience their most severe crisis in the last quarter of a century.

...ho hum.

4 posted on 02/08/2008 9:28:27 PM PST by the invisib1e hand (anyone can be a soldier in peacetime.)
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Ping.....


5 posted on 02/08/2008 9:29:16 PM PST by Rabble (The Second Amendment is in place in case the politicians ignore the others !!)
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To: TigerLikesRooster

bump


6 posted on 02/08/2008 9:36:15 PM PST by japaneseghost (()
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To: TigerLikesRooster

It all boils down to trust.


7 posted on 02/08/2008 9:43:52 PM PST by Vince Ferrer
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To: TigerLikesRooster

This guy teaches at Stern and is very well educated, but the damn website is all about the tin foil.


8 posted on 02/08/2008 9:49:37 PM PST by jblair (Air Force Brat)
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To: TigerLikesRooster

Very likely scenario.


9 posted on 02/08/2008 9:56:52 PM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: TigerLikesRooster

Any site which compares Bush and Cheney to Hitler and Stalin is NO SOURCE to be taken seriously. Sott.net is an extreme leftist, extreme anti-American British web site that rants and raves about how horrible things are here in US and of course honky dory in the socialist eu.


10 posted on 02/08/2008 9:57:21 PM PST by parisa
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To: parisa
I got it from there because the original site by Roubini is for subscribers only.
11 posted on 02/08/2008 9:58:26 PM PST by TigerLikesRooster (kim jong-il, chia head, ppogri, In Grim Reaper we trust)
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To: jblair

“This guy teaches at Stern and is very well educated, but the damn website is all about the tin foil.”

You took the words out of my mouth.

The article speaks for itself, in spite of the kooky website it is on. It’s a scary article.


12 posted on 02/08/2008 9:58:39 PM PST by devere
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To: Vince Ferrer
It all boils down to trust.

And..., to borrow from President Reagan..., Trust BUT, if unable to verify..., prepare for the worst!

That said, it is always better to prepare for the worst and..., ultimately..., be pleasantly surprised by the outcome...

13 posted on 02/08/2008 10:01:08 PM PST by ExSES (the "bottom-line")
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To: All

Doom and gloom chicken little BS. At any given time there are hundreds of people all over Earth predicting the end of the world will come tomorrow.


14 posted on 02/08/2008 10:02:01 PM PST by CaliGangsta
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To: TigerLikesRooster
Read this one. It may be too long to post, and for sure it is over the heads of the rosy glasses pollyannas, but you really will want to read it.

The Financial Tsunami Part IV: Asset Securitization -- The Last Tango

Endgame: Unregulated Private Money Creation

What had emerged going into the new millennium after the 1999 repeal of Glass-Steagall was an awesome transformation of American credit markets into what was soon to become the world's greatest unregulated private money creation machine.

The New Finance was built on an incestuous, interlocking, if informal, cartel of players, all reading from the script written by Alan Greenspan and his friends at J.P. Morgan, Citigroup, Goldman Sachs, and the other major financial houses of New York. Securitization was going to secure a "new" American Century and its financial domination, as its creators clearly believed on the eve of the millennium.

Key to the revolution in finance in addition to the unabashed backing of the Greenspan Fed, was the complicity of the Executive, Legislative and Judicial branches of the US Government right to the Supreme Court. In addition, to make the game work seamlessly, it required the active complicity of the two leading credit agencies in the world - Moody's and Standard & Poors.

It required a Congress and Executive branch that would repeatedly reject rational appeals to regulate over-the-counter financial derivatives, bank-owned or financed hedge funds or any of the myriad steps to remove supervision, control, transparency that had been painstakingly built up over the previous century or more. It required that the major government-certified rating agencies give their credit AAA imprimatur to a tiny handful of poorly regulated insurance companies called Monolines, all based in New York. The monolines were another essential part of the New Finance.

The interlinks and consensus behind the massive expansion of securitization among all these institutional players was so clear and pervasive it might have been incorporated as America New Finance Inc. and its shares sold over NASDAQ.

Alan Greenspan anticipated and encouraged the process of asset securitization for years before his actual nurturing of the phenomenal real estate bubble in the beginning of the first decade of the new Century. In a pathetic attempt to deny his central role after the fall, Greenspan last year claimed that the problem was not mortgage lending to sub-prime customers but the securitization of the sub-prime credits. In April 2005, he sung a quite different hymn to sub-prime securitization. Addressing the Federal Reserve System's Fourth Annual Community Affairs Research Conference, the Fed chairman declared,

"Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country. With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers...The mortgage-backed security helped create a national and even an international market for mortgages, and market support for a wider variety of home mortgage loan products became commonplace. This led to securitization of a variety of other consumer loan products, such as auto and credit card loans." [1]

That 2005 speech was about the time he later claimed to have suddenly realized securitization was getting out of hand. In September 2007 once the crisis was full force, CBS' Leslie Stahl asked why he did nothing to stop "illegal or shady practices you knew were taking place in sub-prime lending." Greenspan replied, "Err, I had no notion of how significant these practices had become until very late. I didn't really get it until late 2005 and 2006..." [2] (emphasis added-w.e.)

As far back as November 1998, only weeks after the near-meltdown of the global financial system through the collapse of the LTCM hedge fund, Greenspan had told an annual meeting of the US Securities Industry Association, "Dramatic advances in computer and telecommunications technologies in recent years have enabled a broad unbundling of risks through innovative financial engineering. The financial instruments of a bygone era, common stocks and debt obligations, have been augmented by a vast array of complex hybrid financial products, which allow risks to be isolated, but which, in many cases, seemingly challenge human understanding." [3]

That speech was the clear signal to Wall Street to move into asset-backed securitization in a big way. After all, hadn't Greenspan just demonstrated through the harrowing Asia crises of 1997-98 and the systemic crisis triggered by the August 1998 sovereign debt default that the Federal Reserve and its liquidity spigot stood more than ready to bailout the banks in event of any major mishap? The big banks were, after all, clearly now, Too Big To Fail - TBTF.

(Continues at the link. Long.)

15 posted on 02/08/2008 10:22:24 PM PST by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: devere
Well, its meant to be scary because he has a follow-up article on the way that might suggest an avenue to safety. I don’t have an Econ PhD, but his scenario is designed like those monster domino deals you might see on video somewhere. The description is FAR too intricate even if his assumptions are solid.

Uncertainty is abstract, and the article describes consequences very concretely. Another poster mentioned faith - behavior and belief will determine what happens.

Besides, he’s going to tell us what to do in the next installment! That said, the doom scenario is possible and the author didn’t assign any scientific-wild-ass-guess probability, so I’ll wait for part 2.

16 posted on 02/08/2008 10:37:43 PM PST by jblair (Air Force Brat)
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To: CaliGangsta

I don’t think you read the article.


17 posted on 02/08/2008 10:39:34 PM PST by REDWOOD99
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To: TigerLikesRooster

Bump.


18 posted on 02/08/2008 10:39:47 PM PST by pgyanke ("Huntered"--The act of being ignored by media and party to prevent name recognition)
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To: jblair

You’ll know this market has bottomed when you see some “SOLD” signs going up on vacant houses. Until then, this nightmare scenario has a greater chance of coming true than a quick recovery, IMHO.


19 posted on 02/08/2008 10:42:02 PM PST by REDWOOD99
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To: Travis McGee

ping


20 posted on 02/08/2008 10:58:16 PM PST by phs3 (If you call a terrorist a freedom fighter, I call you the enemy.)
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