No more greed to feed the city cats

Oh liquidity, where have you gone ?

Lost to greedy homeowners

with ideas above their income.

3 car families and credit card debts

Economic reality, history in progress....

Andy Tulip, Manchester, UK

Part 2
These people separate what they like to call the 'real' economy from the institutional theft that the banking system has become. They think they can help the 'real' economy (the Titanic) by pushing the iceberg further away, slowly, whilst accelerating towards it.

I have become very frustrated. Our economic leaders do not understand what they are doing. They did not see this coming. It was the most widely flagged crash the world has ever seen but they did not see it and now they think they can 'contain' it.

They cannot contain it. The world economy needs this 'fire' to burn out the deadwood but we're still allowing the deadwood to prepare great vats of fuel which will ultimately make it worse.

David Stars, Glasgow, Scotland

Dream on, Anatole. If you think the Central Banks of the world can solve all this by cutting rates, you are sadly mistaken. Rates left too low for too long caused this mess in the first place! £1 trillion of commercial paper (loans to large corporations) is due to expire in the next 6 weeks, and investors in that paper are facing losses of up to 50%. Banks are refusing to lend to each other for more than a few days at a time, as they know they will need that cash in the next couple of months to cover the massive losses they have made on CDOs. If you think this is all a "storm in a teacup" I'd love to see the size of your crockery. What you are in fact witnessing is the early stages of the bursting of an historic debt bubble, and it will be as bad as 1929 if not worse.

Freddie, London,

The main difference between now and a month ago is that there have been several injections of liquidity, some of significantly large amounts (totaling around a third of annual US personal Income Tax payments) into the global banking system which has, for the present, calmed market fear of losses from some lending now thought to have been unwise.
As of the moment much of this added liquidity seems merrily to be being traded away in sharply recovering stock markets.
Questions remain as to whether allowing the markets to correct in this way leaves open the possibility of further larger falls when reduced inter bank liquidity occasioned by reassessment of some commercial paper impacts on the existing pipeline of M&A activity agreed but not yet completed.
Whilst the difference between concern and panic may seem to be one of degree, could there be need for further adjustment of hopes and expectations to accommodate recent change?

dr venables preller, Warminster, UK

I would dispute how 'well' central banks have played their cards (namely slashing rates at any sign of adversity otherwise known as printing money to paper over deeper problems and thereby distorting price signals and postponing trouble).
However, it would be well to note before heeding Kaltesky's buy-dips-it -usually-works advice that the FTSE peaked in 1999 at 6930.2 or nearly 10% above today's market.
Financial globalisation will progress no doubt, but this does not necessarily mean one will profit by buying the FTSE as such globalisation has done little for FTSE investors over the last nearly 8 years.

Jonathan, Dublin, Ireland

Part 6
Until our financial betters acknowledge this we will continue to carve out an increasingly dismal future.

After the fact they will pretend that they saw it coming. That they knew it was coming but they had to keep their heads and try to fix it.

They will say this and they will all keep their jobs and the people at the bottom will be crushed and they will move on to the next uber barrel of pork, confident that this kind of theft goes unpunished.

These people should not lose their jobs. They should go to prison. The Fed Chairmen who did not shout Fire! The BOE governors who followed like good soldiers. The people at the ratings agencies who ignited a feeding frenzy when they called zombies alive and our chancellor, who believed his own PR instead of studying. We have not even started to hear about the effect on pension funds: and it will be profound.

David Stars, Glasgow, Scotland

The main thing I find so disturbing is that these loans were packaged up and sold around the world so easily.
One thing that has always amazed me about America, the land of the free, are the number of licenses needed to conduct a business in the US.
The reason for this is that there are a lot of rogues there. What is surprising, or maybe not, is that there are a lot of rogues in the mortgage business.
So after all this dies down I think we will see more regulation in the US.

Steve Byrne, Christchurch, UK

Pardon me while I have a good laugh. Kaletsky refers to the monster fraud perpetrated mainly by American investment houses aided and abetted by the "independent rating agencies " on pension funds, foreign investors etc as "the relentless progress of globalised finance" !!! it was more like the relentless progress of greed a la Gordon Gecko !! what planet does Kaletsky live on?

gordon gray, auckland, nz

Like any economist Mr Koletsky is never wrong. They work on the principle of how correct they are. Here is my correct analysis. The banks don't know how far they are into these bad debts. It'll take months to years to quantify the impact of them. Given the lack of hard information a 10% variation of the stock markets over a couple of months means nothing. It's all about confidence. The m/c is begining to crack. The rules are changing. Watch, and wait.

RJA, Nottingham, England, UK

Part whatever

Well?

David Stars, Gasgow, Scotland

Part 1
Indeed. The BOE are subsidizing banks. The problem with this approach is that it will not and cannot work its way properly through the system. That is to say that the BOE are giving banks free money in the form of artificially low interest rates.

They say it is to help the liquidity problem but the actual liquidity problem would only be helped if all of this was passed on. Are banks lowering their credit card charges as the lower rates are offered to them? Are they lowering their mortgage rates? No. And they will not.

It's easy to see how they think this might help. It is a band-aid but what they seem to either be missing or unwilling to take on board is that this is a tainted band-aid: With every negative basis-point on the band-aid is attached a little inflammatory poison.

This is a liquidity crunch caused by the provision of excess liquidity in the system. Providing free money (or artificially low rates) is the perpetuation of that which caused it in the first place.

David Stars, Glasgow, Scotland

Part 3
This is about inevitabilities. Someone wrote to me recently and asked how I saw the dollar performing and I wrote back explaining that it was impossible to predict, and I mean impossible as opposed to sometimes being possible but not in the way the twats in investment banks think they can predict the future, for now our central banks are not trying to control inflation or follow originary (for want of a better word) rates: Now they think they are firefighting. They think they are trying to save the system instead of practising capitalism.

Our banking system is a heroin addict and our central banks are do-gooder council workers pouring our money into brain-damaged, and most certainly doomed, rehab schemes.

David Stars, Glasgow, Scotland

"Money that could supposedly be withdrawn at a moment’s notice from the most developed and regulated of international financial markets" presumably includes money deposited with Egg, which recently altered its terms and conditions to give it the right to refuse to allow its depositors to withdraw their own money if it felt that its stability was under threat.
It is not clear whether Egg is more at risk than the other online banks or whether the other online banks are simply being reckless in allowing depositors unrestricted access to their own deposits.

Joseph Bruno, London,

I believ that in many respects Mr Kaletsky is correct in his assumption that the rapid devaluation of CDO's and other financial acronyms in themselves may not spell doom for the global economy.

What I do fear though, is that defaults on sub-prime mortgages are a sign that the US consumers borrowing capacity has been reached leading to lenders making loans with ever increasing risk. Having stared once into the abyss it is unlikely that the US consumer will call his / her bank asking for an increase on their credit card limit and spend the Global economy out of trouble.

Fraser Mackie, Bromley,

Just a bit of English, sure the headline should be An Historic Crisis... ?

Adrian Ryan, Donegal, Ireland