"World is one hedge-fund collapse away from crisis"

[Cruzan]

WASHINGTON (MarketWatch) -- The problems in the U.S. subprime mortgage market could spiral out of control into a global financial crisis, economist Mark Zandi said Thursday.

With a "high level of angst" in the financial markets about who will take the losses from more than $1 trillion in risky mortgages, we could be just one hedge-fund collapse away from a global liquidity crisis, said Zandi, chief economist for Moody's Economy.com.

A global meltdown is not likely, but the risks are growing, Zandi emphasized in a conference call with reporters following the release of a new study on subprime debt that concludes that the housing crisis could be deeper and last longer than investors now believe.

And it could spread. "Mounting mortgage delinquencies and defaults now pose the most serious threat to the global financial system and economy," Zandi said in his report.

"If there is a fault line in the global financial system, it runs through the U.S. housing and mortgage markets," he said.

Zandi's comments came as U.S. financial markets reeled from a growing credit crunch, centered not in the subprime arena, but in the leveraged corporate debt market.

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[Deja Q]

1. Even with China and India growing?

Companies are currently making up for US's losses with their gains. Or so the "mainstream media" has told us.

What the US needs to do to prevent world collapse is another matter. Seems a fairly straightforward one, but what can you do?

[Yael]

2. The problem is

that China & India are among the largest holders of US$ in reserve currency (Japan is first). The more the $ weakens, the less of a position they will hold and the more they will go toward the Euro as their hedge.

A little background: Hand in hand with pulling us off the gold standard and onto fiat currency (unbacked money), Nixon put together a deal with OPEC wherein OPEC would only trade oil in dollars. That system/agreement still exists today and the 2 oil trade centers are NYC and London.

IMO, the main reason we bombed Iraq wasn't for their oil. Hussein threatened to open a new oil trading center (called a "bourse") that would trade exclusively in Euros. This would lead to the world's nations dumping bajillions of US$ onto the market while stockpiling Euros -- thus deflating the US$ 'overnight'.

We are clamoring after Iran now. Google "Iran Oil Bourse" and you will know why this country is such a hot topic where nations like N. Korea and Sudan are taking a back seat.

:hi:

[ayeshahaqqiqa]

3. I agree with your analysis

I've heard this too and think it is very close to the truth. I still think everything will collapse like the house of cards it is--or at least there will be a major readjustment as the other nations run away from the dollar and start using the euro as the international standard.

[Yael]

8. Thanks. I cautioned on this years ago

and people 'dun thought I was nuts. Now, its MSM and they listen. :hi:

Color me a kook...

Have a good weekend. :)

[ayeshahaqqiqa]

12. You and my brother in law

both saw it coming. We've been gathering what we need to survive for quite a while.

[enid602]

5. foreigners

I think that the Chinese, Indians and other foreigners also provided the huge amounts of money that were invested in our mortgage markets. With foreigners understandably becoming a bit more skeptical about investing in the US mortgage market, subprime mortgage money in the US is disappearing almost overnight, and the trillion or so in loans that are soon to reset will not have future funding.

[Yael]

10. There is that as well, indeed. Who wants to invest in a house of cards?

[IDemo]

11. There may not be an official 'bourse' yet, but..

Iran is already trading over half their oil for non-US currency, according to this article:http://biz.yahoo.com/ap/070718/japan_iran_oil_yen.html?.v=1

Nippon Oil Corp., Japan's largest refiner by capacity, may pay Iran in yen for crude oil imports from September or October, a company official said Wednesday.

snip-

National Iranian Oil Co. has been receiving about 70 percent of its oil sales revenues in recent months in non-U.S. currencies, mostly euros, Hojjatollah Ghanimifard, the company's director of international affairs, was quoted as saying by the Oil Ministry's information network.

Ghanimifard said Iran's moved away from the dollar is economically motivated.

[Robbien]

4. CNBC kept saying all day that the problem was with

subprime loan hedges. Of course that is all contained now they further said.

They carefully made sure not to even whisper the words commercial loans or the words private money M&As. One could tell the talking point memo of the day was to focus the blame on those "contained" subprime hedges.

All contained, just an adjustment, now hit bottom. All phrases repeated over and over all day on CNBC.

[SpiralHawk]

6. "The little people must take the losses. Snicker, smirk, sneer" - Fatcat republicon Homeland cronies

"What they hell, they are too weak and stupid to know what the hell is happening anyway, so we must ensure that Commander AWOL, Dickie 'Five Military Deferments' Cheney, and our other Diaper-clad republicon cronies set things up for the little people, the citizens of the formerly free USA, take the hit. Smirk, smirk, smirk."

- Fatcat republicon Homelander cronies

[depakid]

7. With all the bizarre mortgage "products," derivatives and

Credit debt swaps- anything could happen. Couple that with rising oil prices and the outlook isn't pretty.

[kineneb]

9. "Trouble in Hedgistan" -Mike Whitney

http://www.informationclearinghouse.info/article18051.htm


Trouble in Hedgistan: “Its gonna get a lot worse”

By Mike Whitney

07/21/07 "ICH" -- -- Two columns of black smoke can be seen rising over Wall Street and disappearing into the ice-blue New York sky.

Terrorism?

Not quite. The plumes of smoke are all that’s left of two major hedge funds which blew up just weeks ago leaving nothing behind but a few smoldering embers and a mound of black soot.

The compiled assets of the Bear Sterns High-Grade Structured Credit Strategies Fund—nearly $20 billion—have vanished into the miasma of cyber-space where they will soon be joined by $1.4 trillion of other, equally worthless, Collateralized Debt Obligations (CDO).

If you look carefully, you can almost see the mangled and bloodied bodies of the CDOs, the CSDs, the RMBS and the other shaky debt-instruments being pulled from the wreckage and tossed unceremoniously on the bonfire.

Is this how it all ends? The first whiff of trouble in the housing market and then—in a flash--all the funds in “Hedgistan” begin teetering towards earth?

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