Systemic Risk

Hasschu

I was talking to a CEO of a major Bank/Brokerage organization, a man with 40 years experience at the bank executive level. He does not have the benefit of an economics degree as a matter of fact he told me that at one board meeting he put forward a proposal to hire 100 economists in the hopes of getting one that would not follow the herd. What I found most interesting was his opinion on systemic risk which he ranked as follows:
1) US Congress both parties D/R spenders but will not raise taxes.
2) US FED cheap money and Q.E.
3) Bank of England cheap money and Q.E.
4) Japan a basket case from the point of view of all banks, Central Bank and Gov't debt.
5) Chinese banks gov't and quasi non governmental massive lending uderway which will lead to an early collapse of the banking system.
6) Deflation when the stimulus expires in 2011 leading to further problems in the US and Western Europe banking markets due to the unhealthy reserve margins that are designed for perfection.

Opinion on how US will proceed, talk a strong dollar but will move heaven and earth to depreciate the US$ at least 10% while continuing with low cost of money and Q.E. until at least 3% inflation is achieved. Estimation of period of no or slow growth at least ten years.

Think of this as the words of a hard bitten survivor of all the downturns since 1959.

winnow

There is always systematic risk!