Reply to: UBS just posted $10 billion writedown

[AtW]

Bigger danger now is deflation - any deflation and there will be a depression.

The only deflation that may happen is that of house prices or any other overvalued assets. Other things (especially food) will go up in price. I suspect that central banks will accept higher inflation rather than recession - politically motivated of course.

[BrilloPad]

I agree. And raising them at the same time to fight off inflation.

Is there going to be much inflation? Bigger danger now is deflation - any deflation and there will be a depression.

[AtW]

I would guess that they won't, but they could if they needed and it wouldn't cost them any more than e.g. the Iraq war.

War in Iraq has got deferred and spread costs - there is no single $500 bln hit, plus money go into production that keeps jobs and GDP up, military have got big budget anyway.

[wendigo100]

The really horrible thing we're sliding into.

Flip! 1929 all over again?

Plan B - shoeshine boy.

[Bright Spark]

Add another $4bn hit from Societe Generale.

http://news.bbc.co.uk/1/hi/business/7136308.stm

[wendigo100]

I still think cutting interest rates will save us.

I agree. And raising them at the same time to fight off inflation.

[Platypus]

I still think cutting interest rates will save us.

I think it's likely to put off the inevitable sharp decrease in house prices and bankruptcies until GB loses the election, then NewLab can blame the Tories while maintaining their "unblemished" economic record

[BrilloPad]

I still think cutting interest rates will save us.

[BlasterBates]

Does anyone else get the feeling that this time we really are sliding into something horrible?

The really horrible thing we're sliding into.

[Platypus]

It's just a start. People have not started defaulting on their morgages to have banks take over their houses to put on market, and then big drops in house values - all this will make banks write off many more billions. Sub-prime market in the USA, apparently, is over $1 trln, imagine the write down if house prices drop 50%...

This could be very amusing to watch from the sidelines.

I wonder if house prices do drop significantly in the UK what effect this will really have other than on Daily Express readers, e.g. if your house was worth £200k five years ago, now worth say £400k, but drops back to £300k, you're still up on the deal.

[Chantho]

Do you think USA will bail out their (very likely foreign actually) banks to the tune of $500 bln?

I would guess that they won't, but they could if they needed and it wouldn't cost them any more than e.g. the Iraq war.

[Dow Jones]

Blah-blah-blah

1 zillion trillion is b*ll*x. The truth is: WE DON'T KNOW - UBS has had more exposure in the securitized mortgages as they have different processes when assessing risk from someome like Nationwide BS. More risks = more rewards in that market. Generally, banks are playing the odds, however, unlike black-jack or roulette gamblers, the risk is pre-assessed and 99% they will only lose what they can afford to, in UBS case this is more than most. Don't panic.

[lilelvis2000]

The same banks to which the government owes money to? perhaps a bit of you scratch mine and I'll scratch yours!

[AtW]

$500 billion is about 10 x Northern Rock investment by British Government, not very much for a nation like the US.

Do you think USA will bail out their (very likely foreign actually) banks to the tune of $500 bln?

[Chantho]

It's just a start. People have not started defaulting on their morgages to have banks take over their houses to put on market, and then big drops in house values - all this will make banks write off many more billions. Sub-prime market in the USA, apparently, is over $1 trln, imagine the write down if house prices drop 50%...

$500 billion is about 10 x Northern Rock investment by British Government, not very much for a nation like the US.