The financial crisis, still in its early stages, is apparent to everyone: gasoline prices over $4 a gallon; skyrocketing education and medical-care costs; the collapse of the housing bubble; the bursting of the NASDAQ bubble; stock markets plunging; unemployment rising; massive underemployment; excessive government debt; and unmanageable personal debt. Little doubt exists as to whether we’ll get stagflation. The question that will soon be asked is: When will the stagflation become an inflationary depression?
Statement: “Something Big is Happening”
The F.D.I.C. has $53 billion set aside to reimburse consumers for deposits lost at failed banks. IndyMac will eat up $4 billion to $8 billion of that fund, the agency estimates, and that could force it to raise more money from the banks that it insures.
Analysts Say More Banks Will Fail
However this estimate may still be just the tip of the banking crisis iceberg as the Savings and Loans crisis of the early 1990’s witnessed the number of bank failures explode that eventually saw more than 1000 financial institutions go bust, which given that today the US is experiencing the worst housing market crisis since the Great Depression may be in for an even worse fate.
US Banking Crisis Goes from Bad to Worse
The United States economy is in the early phase of its worst housing price collapse since the 1930’s. No end is in sight.
The Financial Tsunami: The Next Big Wave is Breaking Fannie Mae, Freddie Mac and US Mortgage Debt
“You see a massive potential for financial meltdown on a global scale,” said T.J. Marta, fixed-income strategist at RBC Capital Markets.
Losses Set to Worsen as Faith in Bank Bailouts Dims
Jim Cramer, the often loud and always bullish host of a popular CNBC show, is now bearish.
“But this time is different; it’s doom itself,” Cramer recently wrote in New York magazine. “In 25 years on Wall Street, I have never seen things this bad.” “Sell everything. Nothing’s working,” he writes.
Cramer: Stocks are Doomed, Sell Now
“We’re in a nasty environment,” said Tim Bond, Barclays Capital’s chief equity strategist. “There is an inflation shock under way. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth. There is going to be a deep global recession over the next three years as policymakers try to get inflation back in the box.”
Financial Markets Hit by Credit Market Stresses and Deteriorating Corporate Earnings