24 trillion dollars worth of toxic assets in the EU

[JP226]

http://www.telegraph.co.uk/finance/f...ent-warns.html

“Estimates of total expected asset write-downs suggest that the budgetary costs – actual and contingent - of asset relief could be very large both in absolute terms and relative to GDP in member states,” the EC document, seen by The Daily Telegraph, cautioned.

"It is essential that government support through asset relief should not be on a scale that raises concern about over-indebtedness or financing problems.”

The secret 17-page paper was discussed by finance ministers, including the Chancellor Alistair Darling on Tuesday.

National leaders and EU officials share fears that a second bank bail-out in Europe will raise government borrowing at a time when investors - particularly those who lend money to European governments - have growing doubts over the ability of countries such as Spain, Greece, Portugal, Ireland, Italy and Britain to pay it back.

The Commission figure is significant because of the role EU officials will play in devising rules to evaluate “toxic” bank assets later this month. New moves to bail out banks will be discussed at an emergency EU summit at the end of February. The EU is deeply worried at widening spreads on bonds sold by different European countries.

In line with the risk, and the weak performance of some EU economies compared to others, investors are demanding increasingly higher interest to lend to countries such as Italy instead of Germany. Ministers and officials fear that the process could lead to vicious spiral that threatens to tear both the euro and the EU apart.

“Such considerations are particularly important in the current context of widening budget deficits, rising public debt levels and challenges in sovereign bond issuance,” the EC paper warned.

I'm trying to find the flat out numbers, this is more of a leak than anything. But according to the telegraph it's 16.3 trillion pounds. Whether or not that number is correct, odds are we are looking at something greater than 5 trillion dollars. 5 trillion dollars being the number that the US is facing in terms of toxic assets. Dangerous situation, but the EU has not exactly been likely setup for success from the get go.

[Markas]

It's in celebration of the EU's new anthem.

[Dr. Croccer]

It's in celebration of the EU's new anthem.

That was an atrocious joke.

[Markas]

Thankyou, thankyou, I'm here all week.

[JP226]

makes you wonder how many assets europeans and chinese have to spare in our own 2 trillion dollar bailout.

[Denny Crane!]

JP didn't you hear socialism has set us up way better than any mercenary policy the USA has had.

Socialism will save us all, 24 trillion in debt? We'll tax and spend our way out!

[Каие]

JP didn't you hear socialism has set us up way better than any mercenary policy the USA has had. Socialism will save us all, 24 trillion in debt? We'll tax and spend our way out!

Who's ''we'' exactly?

Because on these boards I have heard the values of it, and how it kept european banks safe from quite a few.

Not European banks, but some foreign banks have been kept safe. Lebanon for example, not only is safe but their banks are actually doing better now then before.

I personally believe the roots of it lie with Bill Clinton and the changes he made (forcing a relaxation of the lending rules for poorer people to obtain property) and the idea spread.

Agreed. Bill Clinton is so overlooked. He's responsible for quite a lot things we have problems with today, Bush just failed to fix what he inherited. Because he was completely inept.

I don't think laissez faire capatilism or any other capatilism has been tried to date.

That's what got us into this mess. Gordon Brown put the Chief Executive of a bank -Sir James Crosby of HBOS] in charge of his FSA ''regulation'' body in charge of ''regulating'' banks, yet CEO/Head of Regulation Crosby went ahead and gambled obscene amounts of money in casino style banking anyway, telling Gordon all was good,and to keep shutting his eyes to it since Brownie was getting tax revenue from it. Crosby then proceeded to sack the one person who raised concerns about his shady dealings.

This problem was caused by an ironic mixture of the American mortgage market ruined by Clinton with regulations forcing Banks to give risky and ridiculous mortgages and also a lack of regulation over here, and by Bush, to exposes this and stop it, and keep an eye on it.

Only Vince Cable warned about this 2 years ago. No one ever listens.

[antares24]

http://www.telegraph.co.uk/finance/f...ent-warns.html



I'm trying to find the flat out numbers, this is more of a leak than anything. But according to the telegraph it's 16.3 trillion pounds. Whether or not that number is correct, odds are we are looking at something greater than 5 trillion dollars. 5 trillion dollars being the number that the US is facing in terms of toxic assets. Dangerous situation, but the EU has not exactly been likely setup for success from the get go.

another "doom incoming" "end is near" article...and another discussion about the Euro monetary union break up? MEH.

First it said MAY need 16 trillion pounds, so a confirmation of the numbers would be nice.
Second, it would also be nice to have these numbers provided on a per country basis. I strongly suspect that some countries (example the UK) with a very big financial sector and a lot of banks that today are in trouble represent the lion share of these bad assets, while the problem for some continental European countries may not be so big.

As for:

The EU is deeply worried at widening spreads on bonds sold by different European countries.

of course i think that to worry about this is right, better be safe than sorry, but so far state bonds are being selled without problems, with more demand than supply, becouse in the current economic climate scared investors see pubblic bonds as a safe heaven.

JP didn't you hear socialism has set us up way better than any mercenary policy the USA has had.

Socialism will save us all, 24 trillion in debt? We'll tax and spend our way out!

errr, i'm not a big fan of socialism, but what exactly has it to share with the fact that banks lended money at ridicolous conditions for years? These problems actually have more to do with lack of rules and regulation, and laisse faire capitalism.

[Denny Crane!]

errr, i'm not a big fan of socialism, but what exactly has it to share with the fact that banks lended money at ridicolous conditions for years? These problems actually have more to do with lack of rules and regulation, and laisse faire capitalism.

Because on these boards I have heard the values of it, and how it kept european banks safe from quite a few.

I personally believe the roots of it lie with Bill Clinton and the changes he made (forcing a relaxation of the lending rules for poorer people to obtain property) and the idea spread.

I don't think laissez faire capatilism or any other capatilism has been tried to date.

[Thorn777]

Because on these boards I have heard the values of it, and how it kept european banks safe from quite a few.

I personally believe the roots of it lie with Bill Clinton and the changes he made (forcing a relaxation of the lending rules for poorer people to obtain property) and the idea spread.

I don't think laissez faire capatilism or any other capatilism has been tried to date.

Oh what a sorry excuse to get off on those issues.

[danzig]

Because on these boards I have heard the values of it, and how it kept european banks safe from quite a few.

I personally believe the roots of it lie with Bill Clinton and the changes he made (forcing a relaxation of the lending rules for poorer people to obtain property) and the idea spread.

Man Ive saying that since start of this mess, in the rush to get people into their own housings Clinton basically dug a nice little pitfall that the entire world seems to have walked into. What was it NY Times (suprise of them) ran an article last month about how lenders were pressured to approve loan after loan with little verification because they could always pan it off on Fannie.

[Viking Prince]

Man Ive saying that since start of this mess, in the rush to get people into their own housings Clinton basically dug a nice little pitfall that the entire world seems to have walked into. What was it NY Times (suprise of them) ran an article last month about how lenders were pressured to approve loan after loan with little verification because they could always pan it off on Fannie.

I am a conservative libertarian leaning Rebuplican, but you cannot blame this mess on the little guy buying a $135,000 two bedroom 1100 sf house on a small treeless and greassless suburban plot of land. Even if these cannot be afforded by the buyers, this is not the problem.

This is chasing bent pennies and ignoring the counterfeit $100 bills.

[danzig]

I am a conservative libertarian leaning Rebuplican, but you cannot blame this mess on the little guy buying a $135,000 two bedroom 1100 sf house on a small treeless and greassless suburban plot of land. Even if these cannot be afforded by the buyers, this is not the problem.

Im not blaming the little guy, atleast not entirely Im blaming the easy of credit that border lined on predator like from banks thanks in large part to Clinton. Im not talking about the little guy who bought 135k house, Im talking about my cousin and her husband who bought a 700k house 8+ years ago and now on the brink of losing it when their price range should have been more in 300k range. No bank in the world should have approved their mortage...and it isnt just an isolated case I know atleast half dozen people now facing serious problems thanks buying above their means. That was the problem, Im all for relaxed credit in allowing people to buy houses they could actually *afford* the problem is far too many people didnt do that.

[antares24]

Because on these boards I have heard the values of it, and how it kept european banks safe from quite a few.

I personally believe the roots of it lie with Bill Clinton and the changes he made (forcing a relaxation of the lending rules for poorer people to obtain property) and the idea spread.

I don't think laissez faire capatilism or any other capatilism has been tried to date.

nha socialism didn't had nothing to do with banks being safe and so on, what mattered were the rules on credit in the various Eu countries and the general banking sector mind set in every country.

That the reason for wich there are several banks who had to be bailed out (or in some case even nationalized) like in the UK, Ireland or Belgium, while there are big European countries were not a single bank had to be helped.

Again, Europe still isn't a single country but is made of different countries with different policies and in this case, different financial and banking system, so in the end, while a EU wide coordination would help, each country will have to save his financial sector and his banks, if that will be needed.

EDIT:about the Clinton moves, i too think that that was a bad move and a start of this problem, but he's hardly the sole culprit.

[Da Skinna]

That's $24,000,000,000,000.00 is it not?

[Thorn777]

That's $24,000,000,000,000.00 is it not?

Probably not, but the Telegraph will certainly sell good tomorrow.

[JP226]

JP didn't you hear socialism has set us up way better than any mercenary policy the USA has had.

Socialism will save us all, 24 trillion in debt? We'll tax and spend our way out!

I don't know how europe is going about this, or I guess UK in your situation seneca, but this notion of taxing and spending our way out is absurd. And I know the latest stimulus isn't meant for the banks. Some would even say this is a whole new ball game, but it's not. The two are linked. In the US were talking about tossing an additional trillion and ahalf to curb the recession stb depression. We first thought that someone buying the up the bad debt, the toxic debt, would fix it. Buy all the debt and the mortgages that are worthless would be worth something. Nevermind that it is impossible to arbitrarily assign value to something that is worthless in the first place. But the cash flooding into the assets that weren't really assets failed. It was unsuccessful because the debt that backed the swaps in the first place wasnt going to be replicated. In english that means, banks aren't going to continue giving out subprime loans, which is essenitally what has to happen to get consumption back up under that strategy.

So our next plan is to attack the problem in a keyensian frame of mind. Spend spend spend. Now some of you with left leaning tendancies and may understand some of the bare bones of economics would contend that spending, no matter where it is, incites production. The gov spends, the money goes to a company which then pays it's employees and hires workers who then take the money home and spend the dollars to generate production. That's basically called the multiplier effect, but barring to much theoretical debate, it's a lie. The government had to get the money from some where and as a result that "somewhere" has less to spend and now the dollars are spent inefficiently. If you want anymore detail or argument on the matter, i'll discuss sticky wages with you else where.

But hey, let's pretend that trying such a strategy for what, the millionth time will actually work. Hell who's to say a ball doesn't go up when you drop it the millionth time... But let's say Keyenes was right on the matter and spending our way out works. The US government has ever so screwed up keyensian economics that it's embarassing. The idea is laid out as I described above but the key ingredient is broad spending. THings like high ways and by ways. Big projects that affect lots of people. When Roosevelt went about it, he created the CCC camps and the tennessee valley authority, built roads and maintained parks and finished construction of the hoover dam. Massive projects which would theoretically inject an economy with a shock of income pulling it out of it's funk. But our brave and noble government stands buy and says no sir. We shall not take a bad idea and implement it, we shall take a bad idea and implement it incorrectly. And thus you have the stimulus package in the US funding things like birth control and the national mall... Somebody needs to seriously start executing memebers of congress. I hope to god the south rises again.

[antares24]

.

But hey, let's pretend that trying such a strategy for what, the millionth time will actually work. Hell who's to say a ball doesn't go up when you drop it the millionth time... But let's say Keyenes was right on the matter and spending our way out works. The US government has ever so screwed up keyensian economics that it's embarassing. The idea is laid out as I described above but the key ingredient is broad spending. THings like high ways and by ways. Big projects that affect lots of people. When Roosevelt went about it, he created the CCC camps and the tennessee valley authority, built roads and maintained parks and finished construction of the hoover dam. Massive projects which would theoretically inject an economy with a shock of income pulling it out of it's funk. But our brave and noble government stands buy and says no sir. We shall not take a bad idea and implement it, we shall take a bad idea and implement it incorrectly. And thus you have the stimulus package in the US funding things like birth control and the national mall... Somebody needs to seriously start executing memebers of congress. I hope to god the south rises again.

LOL the south second rise that made me laugh, but i agree with you on this that a lot of that money is simply wasted, in the end it will simply add to pubblic debt, that taxpayer will have to finance in the future.

[Denny Crane!]

I don't know how europe is going about this, or I guess UK in your situation seneca, but this notion of taxing and spending our way out is absurd. And I know the latest stimulus isn't meant for the banks. Some would even say this is a whole new ball game, but it's not. The two are linked. In the US were talking about tossing an additional trillion and ahalf to curb the recession stb depression. We first thought that someone buying the up the bad debt, the toxic debt, would fix it. Buy all the debt and the mortgages that are worthless would be worth something. Nevermind that it is impossible to arbitrarily assign value to something that is worthless in the first place. But the cash flooding into the assets that weren't really assets failed. It was unsuccessful because the debt that backed the swaps in the first place wasnt going to be replicated. In english that means, banks aren't going to continue giving out subprime loans, which is essenitally what has to happen to get consumption back up under that strategy.

Indeed its addressing symptoms not causes.

So our next plan is to attack the problem in a keyensian frame of mind. Spend spend spend. Now some of you with left leaning tendancies and may understand some of the bare bones of economics would contend that spending, no matter where it is, incites production. The gov spends, the money goes to a company which then pays it's employees and hires workers who then take the money home and spend the dollars to generate production. That's basically called the multiplier effect, but barring to much theoretical debate, it's a lie. The government had to get the money from some where and as a result that "somewhere" has less to spend and now the dollars are spent inefficiently. If you want anymore detail or argument on the matter, i'll discuss sticky wages with you else where.

But hey, let's pretend that trying such a strategy for what, the millionth time will actually work. Hell who's to say a ball doesn't go up when you drop it the millionth time... But let's say Keyenes was right on the matter and spending our way out works. The US government has ever so screwed up keyensian economics that it's embarassing. The idea is laid out as I described above but the key ingredient is broad spending. THings like high ways and by ways. Big projects that affect lots of people. When Roosevelt went about it, he created the CCC camps and the tennessee valley authority, built roads and maintained parks and finished construction of the hoover dam. Massive projects which would theoretically inject an economy with a shock of income pulling it out of it's funk. But our brave and noble government stands buy and says no sir. We shall not take a bad idea and implement it, we shall take a bad idea and implement it incorrectly. And thus you have the stimulus package in the US funding things like birth control and the national mall... Somebody needs to seriously start executing memebers of congress. I hope to god the south rises again.

Secession would do the USA a lot of good (ie some states seeking independance) certainly from what I hear thanks to the USA's government mishandling of the economy and spending there are several states who simply are failing to function and balance their books.

Over here we are basically swallowing the debt and copying on a smaller scale the keynsian plan, which I think is just fabulous. Look at how much good it did Japan (oh crap).

This was rather interesting:

Adam Smith gets the last laugh
By P.J. O’Rourke

Published: February 10 2009 19:22 | Last updated: February 10 2009 19:22

The free market is dead. It was killed by the Bolshevik Revolution, fascist dirigisme, Keynesianism, the Great Depression, the second world war economic controls, the Labour party victory of 1945, Keynesianism again, the Arab oil embargo, Anthony Giddens’s “third way” and the current financial crisis. The free market has died at least 10 times in the past century. And whenever the market expires people want to know what Adam Smith would say. It is a moment of, “Hello, God, how’s my atheism going?”

Adam Smith would be laughing too hard to say anything. Smith spotted the precise cause of our economic calamity not just before it happened but 232 years before – probably a record for going short.

“A dwelling-house, as such, contributes nothing to the revenue of its inhabitant,” Smith said in The Wealth of Nations. “If it is lett [sic] to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue.” Therefore Smith concluded that, although a house can make money for its owner if it is rented, “the revenue of the whole body of the people can never be in the smallest degree increased by it”. [281]*

Smith was familiar with rampant speculation, or “overtrading” as he politely called it.

The Mississippi Scheme and the South Sea Bubble had both collapsed in 1720, three years before his birth. In 1772, while Smith was writing The Wealth of Nations, a bank run occurred in Scotland. Only three of Edinburgh’s 30 private banks survived. The reaction to the ensuing credit freeze from the Scottish overtraders sounds familiar, “The banks, they seem to have thought,” Smith said, “were in honour bound to supply the deficiency, and to provide them with all the capital which they wanted to trade with.” [308]

The phenomenon of speculative excess has less to do with free markets than with high profits. “When the profits of trade happen to be greater than ordinary,” Smith said, “overtrading becomes a general error.” [438] And rate of profit, Smith claimed, “is always highest in the countries that are going fastest to ruin”. [266]

The South Sea Bubble was the result of ruinous machinations by Britain’s lord treasurer, Robert Harley, Earl of Oxford, who was looking to fund the national debt. The Mississippi Scheme was started by the French regent Philippe duc d’Orléans when he gave control of the royal bank to the Scottish financier John Law, the Bernard Madoff of his day.

Law’s fellow Scots – who were more inclined to market freedoms than the English, let alone the French – had already heard Law’s plan for “establishing a bank ... which he seems to have imagined might issue paper to the amount of the whole value of all the lands in the country”. The parliament of Scotland, Smith noted, “did not think proper to adopt it”. [317]

One simple idea allows an over-trading folly to turn into a speculative disaster – whether it involves ocean commerce, land in Louisiana, stocks, bonds, tulip bulbs or home mortgages. The idea is that unlimited prosperity can be created by the unlimited expansion of credit.

Such wild flights of borrowing can be effected only with what Smith called “the Daedalian wings of paper money”. [321] To produce enough of this paper requires either a government or something the size of a government, which modern merchant banks have become. As Smith pointed out: “The government of an exclusive company of merchants, is, perhaps, the worst of all governments.” [570]

The idea that The Wealth of Nations puts forth for creating prosperity is more complex. It involves all the baffling intricacies of human liberty. Smith proposed that everyone be free – free of bondage and of political, economic and regulatory oppression (Smith’s principle of “self-interest”), free in choice of employment (Smith’s principle of “division of labour”), and free to own and exchange the products of that labour (Smith’s principle of “free trade”). “Little else is requisite to carry a state to the highest degree of opulence,” Smith told a learned society in Edinburgh (with what degree of sarcasm we can imagine), “but peace, easy taxes and a tolerable administration of justice.”

How then would Adam Smith fix the present mess? Sorry, but it is fixed already. The answer to a decline in the value of speculative assets is to pay less for them. Job done.

We could pump the banks full of our national treasure. But Smith said: “To attempt to increase the wealth of any country, either by introducing or by detaining in it an unnecessary quantity of gold and silver, is as absurd as it would be to attempt to increase the good cheer of private families, by obliging them to keep an unnecessary number of kitchen utensils.” [440]

We could send in the experts to manage our bail-out. But Smith said: “I have never known much good done by those who affect to trade for the public good.” [456]

And we could nationalise our economies. But Smith said: “The state cannot be very great of which the sovereign has leisure to carry on the trade of a wine merchant or apothecary”. [818] Or chairman of General Motors.

* Bracketed numbers in the text refer to pages in ‘The Wealth of Nations’, Glasgow Edition of the Works of Adam Smith, Oxford University Press, 1976

[JP226]

Im not blaming the little guy, atleast not entirely Im blaming the easy of credit that border lined on predator like from banks thanks in large part to Clinton. Im not talking about the little guy who bought 135k house, Im talking about my cousin and her husband who bought a 700k house 8+ years ago and now on the brink of losing it when their price range should have been more in 300k range.

You know, the CPI index change has been 794.59% since 1950. A suburban house back then cost some where around 5k roughly, 2 or 3 bedrooms a living room and kitchen, maybe 2 baths. 5,000 dollars then is worth about 44k now. So where has the other 1 to 2 hundred k come from? Some of it's demand, but the fact that the prices have jumped 300% or so is really rooted in the notion of cheap credit creating WAY too much demand. Kind of gives you an idea of how out of line the interest rates have been.