PS: I might move it to the strat forum so we can have a more encompassing discussion after it gains some critical mass.
ss_roy wrote:I am not sure that most of you comprehend the full extent of this self-inflicted disaster. If you do, I am sorry for repeating it.
1] The entire western banking system is insolvent- not illiquid, just plain insolvent. Extensive governement intervention is the only reason banks are still operating in the western world.
2] The mechanisms of self-regulation and credit rating has been shown to be fraudulent. Many financial sectors like IBs, Hedge Funds and even plain insurance companies are f**ked. Inter-institution trust has collapsed. Banks are hoarding money and the effects of credit contraction on non-financial businesses are starting to get ugly.
3] The financial system in the west will never be the same again. To date they have lost 4 times the amount of inflation adjusted money they have made since 1400 AD . The 600 year old business model of western banks is therefore essentially dead. Lots of reasons. The reincarnated version of western banks will look a lot like nationalized banks in India.
4] This collapse has destroyed trillions of notional wealth and will destroy trillions more. Pensions in the western world are DOA. Many professions like doctors, lawyers are starting to realize that they will never make the same amount of money again.
5] The financial shell games and ponzi schemes of the last 30 years have come back to haunt them- all at once!The demographic profile of the west is not good. They have too many baby boomers who had hoped to retire but now find themselves unable to retire.
6] Don't believe westerners who say "it will come back". That is PR and wishful thinking. Read more about the real causes of this crisis and why it will essentially end the dominance of the west.
7] The west has not yet officially capitulated, but it will have to..
What it means for India.
1] China is toast! Unless they pull a rabbit out their behinds, their progress will start to unwind. They built an economy that was too dependent on exports, and they discouraged their citizens from consuming their own stuff. The debt based export market has collapsed, and local consumption has not yet caught up with production. Expect massive job losses and widespread civil unrest.
2] Pakistan is DOA. Hopefully they (fundies) will pull of a stupid stunt with loose nukes in the west. It would be very desirable if the US nuked them in retaliation.
3] The main leverage of the west over 'colored' countries like India is gone! They need you much more than you need them. But you guys have to realize that and take advantage of this calamity. Expect them to line up and sell you high tech stuff- nuclear reactors, missiles, avionics, aircrafts, technology- anything you desire. Their socioeconomic system requires new consumers, they are old and tapped out- you are not.
3] If India plays it's cards right, it could position itself as the biggest growth market in the world. We still have well run and transparent banks and people who do not save too much like the chinese or too little like the americans.
4] I hope that any new government in India (2009?) will not be full of geriatrics. Hopefully, they will also stop being obstructionist, petty and let people become rich. I have always believed that politicians and bureaucrats in India conspire to hinder progress and keep people poor.
I could write in much greater detail, but it might make it harder to grasp the big picture.
If could post links to blogs that have been following this story for the last 3 years, if you want..
ss-roy please do post the links over here.