Are banks well-capitalized or insolvent?

[Supercilious]

Re: Are banks well-capitalized or insolvent?

Nero, don't bother with metalman. He is the voice of the faithful. He defends automatically everything that seems to be the official iTulip position. Seeing his latest graphical aids I can't stop thinking at the resemblance with an attack chihuahua.

There was a time when metalman was as clueless as he is now, and produced the same kind of clueless chart attacks and low IQ cynicism because I was expressing scepticism in the Dollar Ratchet Theory.

Eventually Fred had to come to terms with reality and declare that:

We have a short and succinct word to describe our $780 dollar ratchet price of gold call: wrong.

At that point metalman stopped suddenly to annoy me with parroting the Dollar Ratchet mantra, ... but I continued to have fun with the "Fed's Hammer Drill" theory.

You should not waste to much time with his faith based arguments, only if you want to have some fun and hear a lot of high pitched barking emanating from the attack chihuahua.

I, personally, have fun from time to time rattling his zealous leash as I did with the "TIPS Graphical Theory of Inflation" ... however most of the time I ignore his clueless barking... not worth my time.

For example I could ask if is he still believes I was wrong for being sceptical about the "Dollar Ratchet" and if he still defends that theory... But why should I do something like that ?

[Raz]

Re: Are banks well-capitalized or insolvent?



Why would anyone believe anything that Geithner says about the banks?
He graduated from the Greenspan/Bernanke School for Advanced Mendacity. He's a liar, Bernanke is a liar, Summers is a liar, Paulson is a liar, and on and on and on and on ad infinitum.:mad:

[nero3]

Re: Are banks well-capitalized or insolvent?

Why would anyone believe anything that Geithner says about the banks?
He graduated from the Greenspan/Bernanke School for Advanced Mendacity. He's a liar, Bernanke is a liar, Summers is a liar, Paulson is a liar, and on and on and on and on ad infinitum.:mad:

He is at least a good liar. I give him credit for that. When he started talking about the patriotism of the treasury group, in that speech today, well, I was starting to think, what's next, is he going to claim he invented the internet?

[metalman]

Re: Are banks well-capitalized or insolvent?

I doubt your 3 gold coins can buy a house even then, but you never know. Oh, on housing. I think there is a flaw with the CPI, therefore things are not as they look on that chart. Try instead to find the nominal prices, from 1971-1980, deflate by the CRB. do the same for 2001-2009

cpi sucks? really? huh. amazing. i did not know that. wow. shocked. really. gee.

House prices in gold (updated, longer series)

[nero3]

Re: Are banks well-capitalized or insolvent?

http://research.stlouisfed.org/fred2/series/EXINUS

This is just one of many. But when gold goes up, and the currency of countries like India is strong. you know there is some serious debasement going on, like now, or in the seventies. Afterwards comes the boom in the US. The question is just. When? Now, or some more years with debasement first?

[rabot10]

Re: Are banks well-capitalized or insolvent?

But, what if the easing of market to market accounting, work out similar to in 80-82, in the sense that the government inflate so much that those assets again become "gold" ? If you quantify a turn in the credit cycle, would it not be possible to disable market to market, between now, and the turn, again have solvent banks?

Just a friendly question are you OK in the head? U don't seem like U R jmho

rick

[nero3]

Re: Are banks well-capitalized or insolvent?

Just a friendly question are you OK in the head? U don't seem like U R jmho

rick

No, I am bordering on insane. That was why I called the dollar rally as early as may last year:cool:

[cjppjc]

Re: Are banks well-capitalized or insolvent?

People, let's be logic. The banks are insolvent. There is no such thing as illiquid assets. Everything can be sold at the right price and to the right people.

I can sell even my aunt Petunia's bellybutton ring for the right price to the right pervert.

The problem is that banks are insolvent, and all this talk about illiquid assets is nothing else than BS.

I think yesterday on Tickerforum a bond trader posted the following message about the valuation of mortgage crap:
http://www.tickerforum.org/cgi-ticke...www?post=92096

If the banks were to sell the toxic crap at market prices the losses on these assets would make them all insolvent. They are loaded with paper which is nothing else than bad debt that cannot be repaid and will be defaulted.

All this bailout craze is nothing else than fraud on a national level perpetrated by the state (or by the Timmys placed in high gov positions by the banks), in which the bad debt is moved from the balance sheet of banks to the taxpayer.

Look what happens with the Chrysler bankruptcy talks:
http://www.nytimes.com/2009/04/22/bu...1&ref=business
So, for debt traded on the market at 10-15c on a dollar, JPM and Citi want to get from the taxpayer roughly 75-95c on the dollar. I would call this the mugger's spread.

If anybody can call this anything else than fraud and outright theft, ... well, ... I'm ready to listen to the arguments.

Wow. That was great. I had no idea the market was a liquid as that trader says. I wonder how many trades are taking place each day. Thanks for the post. There have been so many informative posts on this site since I joined. Hundreds that I have read from earlier. This one is up there.

[cobben]

Re: Are banks well-capitalized or insolvent?

"would it not be possible to disable market to market, between now, and the turn, again have solvent banks?"

Nero is of course right here, what's the problem with that?
It's just that almost no-one at iTulip believes they can pull it off this time.

I don't either, for now, but I'm keeping more than one eye open for anything that may indicate I'm wrong.

[nero3]

Re: Are banks well-capitalized or insolvent?

"would it not be possible to disable market to market, between now, and the turn, again have solvent banks?"

Nero is of course right here, what's the problem with that?
It's just that almost no-one at iTulip believes they can pull it off this time.

I don't either, for now, but I'm keeping more than one eye open for anything that may indicate I'm wrong.

I am very surprised by this view. The spreads are very good for banks. After all they borrow short and lend long. However, the economy must get going so the losses stop mounting. As it looks now, that will happen through government pump priming.

[Supercilious]

Re: Are banks well-capitalized or insolvent?

I am very surprised by this view. The spreads are very good for banks. After all they borrow short and lend long. However, the economy must get going so the losses stop mounting. As it looks now, that will happen through government pump priming.

I don't know about that nero. I don't think the system can get going again on a long term basis without purge of bad debt from the system. Until bad debt is not purged from the system losses will keep mounting.
Someone has to be left holding the bag. I don't think this crisis can be solved only by priming.
They can kick the can further down the road for a while.
I believe they are able to pull it, and probably they will. What I don't know exactly is how are they going to do it. What exactly will be the mix of: delay, jubilee, revolution and theft from abroad.

[cobben]

Re: Are banks well-capitalized or insolvent?

"The spreads are very good for banks. After all they borrow short and lend long."

This is a great time to start a new bank I would think, fresh & with no existing liabilities.
Not having any banking experience, mega-capital, nor contacts in high places I suppose there's no idea in trying?

The problem for the existing banks is that they are being eaten alive by their legacy bad debts & bad deals, and if things are half as bad as they seem, some banks at least will get eaten alive 10 times over before this is through.

[unlucky]

Re: Are banks well-capitalized or insolvent?

He is at least a good liar. I give him credit for that. When he started talking about the patriotism of the treasury group, in that speech today, well, I was starting to think, what's next, is he going to claim he invented the internet?

Based on what Raz said in an earlier post, what Geithner said may be literally true while at the same time being grossly misleading. He is well practised in the modern art of "deniability": i.e., never say anything that is false, but mislead as much as you can. This is a genuine curse in modern business and politics - it is widely practised by senior management in many companies. The ability to do this is viewed almost as a neccessary qualification for entry to senior management.

[WildspitzE]

Re: Are banks well-capitalized or insolvent?

Based on what Raz said in an earlier post, what Geithner said may be literally true while at the same time being grossly misleading. He is well practised in the modern art of "deniability": i.e., never say anything that is false, but mislead as much as you can. This is a genuine curse in modern business and politics - it is widely practised by senior management in many companies. The ability to do this is viewed almost as a neccessary qualification for entry to senior management.

Of course! Take this excerpt (from the bloomberg link at the top of this post) for example:

"U.S. stocks advanced the most in almost two weeks, led by financial shares, after Treasury Secretary Timothy Geithner said the “vast majority” of the nation’s banks have enough capital."

Vast majority? As in the number of banks? Doh!

How about by assets at risk? or by deposits at risk? It's all a big circle jerk.

[nero3]

Re: Are banks well-capitalized or insolvent?

I don't know about that nero. I don't think the system can get going again on a long term basis without purge of bad debt from the system. Until bad debt is not purged from the system losses will keep mounting.
Someone has to be left holding the bag. I don't think this crisis can be solved only by priming.
They can kick the can further down the road for a while.
I believe they are able to pull it, and probably they will. What I don't know exactly is how are they going to do it. What exactly will be the mix of: delay, jubilee, revolution and theft from abroad.

I don't know. There is countries with much worse debt to gdp ratio's than the US. They was able to bring themselves into that position. It would not surprise me the least if the US was able to take it up one notch further, and if it don't happen, then they can just print as during WW2, or default trough the printing press. You still get a boom, if you print enough.