Phorgy Phynance

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Still talking about subprime

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Occasionally, I like to poke my nose in and see what my old comrades are up to over on NP. It seems the infamous thread is still alive and kicking.

However, it appears they are still talking about subprime. When are they going to realize that subprime was merely the first symptom of a massive global credit/asset bubble to surface? In economic terms, the dollar amount involved in any Treasury Dept bailout will be insignificant. However, when you multiply that amount by the insane leverage financial institutions have in, mostly off balance sheet, exposure, then things make more sense. Don’t be fooled. No policy maker cares about subprime borrowers. They are desperately trying to keep one, if not several major banks, afloat. Sorry Citigroup. The music has stopped.

Financial markets have a long way to go down still. The US economy will get whacked in a historical fashion, but we won’t be knocked out by any means. There are still strong sectors in our economy that will benefit from the coming “onshoring“. Pain is a good teacher and I, for one, will welcome the exorcism of complacency that is eminent.

Written by Eric

December 4, 2007 at 11:14 pm