I stumbled across this quote while looking for something entirely different. Written at the start of 2008, James Howard Kunstler writes his predictions for the year 2008 – from the section on housing and finance….
[ad#200-left]What happens out there on the housing market scene will certainly redound in banking and finance and whatever still constitutes the US economy generally. The fears and uncertainties surrounding all credit-backed tradable securities derive first from the millions of troubled home mortgages dangling slowly in the wind. These fears and uncertainties will multiply as defaults commence in commercial real estate, and desperate individuals next enter a wave of credit card default, all of it, too, securitized and sprinkled all over the world. None of this stuff has yet been priced into the public disclosures of the many troubled banks and bank-like companies holding it. Nor does anyone really know how this is affecting the hedge funds, and their staggering leveraged positions in things that are looking more and more like quicksand. I can’t imagine that quite a few major banks will not collapse in the first half of 2008.
It is hard to escape the conclusion that many hedge funds will also blow up, given the unsoundness of their counter-parties’ positions, not to mention the frailty of the bond reinsurers. But the death of more than a few hedge funds could easily unwind the entire global finance system — meaning a period of destructive chaos followed by a set of severely different institutional arrangements, with untold loss of imagined capital wealth along the way and big changes in everyday life. The world has never really been in a situation like this before and it is impossible to say what it might lead to. But there is no doubt that the American public has enjoyed an artificially high standard of living in relation to the value of what we actually produce — fried chicken, hair extensions, and the Flaver Flav Show — so the conclusion is pretty self-evident.
Certainly not far off the mark, timelines and outcomes are impossible to predict with much more accuracy than this, makes me think that we should go and read the rest of the predictions – check them out here.