Financial Tsunami

**reason** · June 24th, 2008, 07:03 PM

Faster Inflation May Unleash `Financial Tsunami': Chart of Day

By Mark Gilbert

June 24 (Bloomberg) -- Rising consumer prices will leave more U.S. consumers unable to pay their debts and may lead to a ``financial tsunami,'' according to Bennet Sedacca, president of money manager Atlantic Advisors LLC in Winter Park, Florida.

``Whether it is anecdotal or statistical evidence, I see inflation everywhere, and this is where the financial tsunami cometh,'' Sedacca wrote in a report published yesterday. ``A battered, over-indebted consumer, if forced to retrench, could create even more problems for the banking system as loan delinquencies would begin to rise even further. All sorts of delinquencies are rising. This is now a systemic issue.''

The four-part chart of the day shows how U.S. householders are struggling to pay their home loans. The top white chart shows the surge in delinquencies on all mortgages, while the yellow one measures foreclosures. The green chart tracks delinquencies on subprime adjustable-rate mortgages, and the purple one shows subprime mortgages that are 60 days behind on their payments.

Sedacca wrote that current financial-market conditions remind him of ``someone standing on a lonely beach, armed with only a small bucket, trying to stop a rare tsunami that hits the shores. It is how I feel about our markets and the tools being utilized by the Federal Reserve, the European Central Bank and other regulatory bodies. They are overmatched for what they are facing and, worse yet, they helped create the mess in the first place by being far too easy with money and debt creation.''

To contact the reporter on this story: Mark Gilbert in London at [email protected]

Last Updated: June 24, 2008 09:09 EDT

http://www.bloomberg.com/apps/news?p...efer=worldwide

**Beachcomber** · June 25th, 2008, 11:38 AM

But you can bet the politicians and the fat cats on Corporate Boards will ride it out on their yachts, only the middle class will be submerged..

**LanDroid** · June 26th, 2008, 02:05 AM

"I see inflation everywhere..."

So would this be a good time to buy bonds?

**Lew** · June 26th, 2008, 10:43 AM

Wow, I had no idea LanD was such an uber-capitalist...at this rate, it won't be long before he's arguing for de-regulation of the energy industry..... [img]wink.gif[/img]

**reason** · June 26th, 2008, 12:03 PM

Originally posted by Beachcomber:
But you can bet the politicians and the fat cats on Corporate Boards will ride it out on their yachts, only the middle class will be submerged..

The world in general is geared toward those who have the most. That is the nature of things.

**gae** · June 26th, 2008, 01:26 PM

Originally posted by LanDroid:
"I see inflation everywhere..."

So would this be a good time to buy bonds?

Lan... it's called cash. Under the bed. Just make sure your house doesn't burn down.

[img]wink.gif[/img]

On a more serious note, I don't know why we are having the hysteria. Things go up and go down. We cannot be in boom times constantly.

Off topic: (LewBaby said I could do this.) Props to the Supreme Court for upholding our 2nd Amendment rights!!. To hell with them for their opinion on child rapists.

**reason** · June 26th, 2008, 04:00 PM

Originally posted by Beachcomber:
But you can bet the politicians and the fat cats on Corporate Boards will ride it out on their yachts, only the middle class will be submerged..

This from todays Wall Street Journal, page A2. By David Wessel:

Inequality: The gap between economic winners and losers in the U.S. is growing; the trend didn't begin with President Bush's election, but he didn't do much to arrest it. Economists Emmanuel Saez of the University of California, Berkeley, and Thomas Piketty of the Ecole d'Economie de Paris calculate that even excluding capital gains, 75% of pretax-income growth in what they call the Bush expansion (2002-2006) went to the best-off 1% of American families versus 46% in the Clinton expansion (1993-2000). There is significant disagreeement among politicians and voters about how hard teh government should restrain market foreces that are widening the income gap, particularly how much the the tax code should resitribute income.

The differences between the candidatesare sharp: Sen. Obama would wield the tax code more aggressively than Sen. McCain.

**reason** · June 26th, 2008, 04:05 PM

Originally posted by gae:
<blockquote>quote:<hr />Originally posted by LanDroid:
"I see inflation everywhere..."

So would this be a good time to buy bonds?

On a more serious note, I don't know why we are having the hysteria. Things go up and go down. We cannot be in boom times constantly.

<hr /></blockquote>Hint: There's a big difference between WorldCom and Enron going down than if Merrill goes under.

**reason** · June 26th, 2008, 04:09 PM

Another hint: We've been living off debt, lot's of it. The illusion of prosperity disappears when banks are no longer sufficiently capitalized and credit disappears.

[ June 26, 2008 01:09 PM: Message edited by: The Big Sexy ]

**reason** · June 26th, 2008, 04:31 PM

While I post gloom and doom, I do not make any guarantee the financial apocalypse is underway. But there are some very troubling things from a number of sources that could pop up and create quite a mess.

I'm not qualified to offer investment advice (so I don't), but if we can get through the next wave of option arm resets and banks can start raising enough capital to do more than offset the massive writedowns, maybe some sanity can return to the situation.

The United States is attractive to investors due to it's advanced and well-developed financial system. It is scary, however, just how "black-box" some of our biggest financial institutions are.

[ June 26, 2008 01:32 PM: Message edited by: The Big Sexy ]

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