To quote Nouriel Roubini today
http://en.wikipedia.org/wiki/Nouriel_Roubini
We are now facing:
- a silent run on the huge mass of uninsured deposits of the banking system and even a run on some insured deposits are small depositors are scared;
- a run on most of the shadow banking system: over 300 non bank mortgage lenders are now bust; the SIVs and conduits are now all bust; the five major brokers dealers are now bust (Bear and Lehman) or still under severe stress even after they have been converted into banks (Merrill, Morgan, Goldman); a run on money market funds; a serious run on hedge funds; a looming refinancing crisis for private equity firms and LBOs);
- a run on the short term liabilities of the corporate sector as the commercial paper market has totally frozen (and experiencing a roll-off) while access to medium terms and long term financings for corporations is frozen at a time when hundreds of billions of dollars of maturing debts need to be rolled over;
- a total seizure of the interbank and money markets.
This is indeed a cardiac arrest for the shadow and non-shadow banking system and for the system of financing of the corporate sector. The shutdown of financing for the corporate system is particularly scary: solvent but illiquid corporations that cannot roll over their maturing debt may now face massive defaults due to this illiquidity. And if the financing of the corporate sectors shuts down and remains shut down the risk of an economic collapse similar to the Great Depression becomes highly likely.
Although he is very much a bears bear he's not some lunatic with no idea about the real world. I think this is the big one that people have talked about for decades.
The reason the UK Government doesn't want to provide an unlimited guarantee for all bank deposits is simple. They can't cover it. If people were to realise that the banks have much more money/debt than the Government then the Wizard of Oz that stands behind the Wizard of Oz Banks would be exposed for the puny man he really is. FIAT money itself then experiences a run and people only by gold, beans and shotguns.
For quite some time I've said this is 1990 all over again. Today I'm winding that prediction back 60 years and digging out old episodes of The Waltons for tips. (50/50 chance)
Several low cost, charter, legacy, private, small and large airlines will go bust in the Winter in the EU. That is a predicition which I will stand by and its the reason I wouldn't be a Wannabe right now. If things get as bad as I fear they will then at least I have a farm.
WWW