The CNN story here
shows just what a mess the banking sector is in. The sad thing is that the list of 250 banks ‘in trouble’ is only in the USA. When I clicked on the link, I was rather hoping that it was a global list. Perhaps it was less hope and more blind optimism. Whatever.
However, you look at it, this is a real threat to the global economy. If it were 250 banks in trouble worldwide, it would still be a threat to the global economy - just a smaller one!
What amazes me about this sort of news is the lack of impact it seems to be having on the world’s major stock exchanges. I know, I know. Markets have been violently volatile and there have been some monster falls. But still, if the entire banking system were to go under - especially in our uber connected financial world - most markets would cease trading and further trillions of dollars would be lost.
And these are the banks in trouble now. Sure, we have all heard about the credit crunch and NINJA loans. But when the recession starts to bite on every single family in America, which it seems to be starting to do, then many more mortgages, loans and credit cards will be heading for default.
If the banks are in trouble now, just wait 6 months to see what trouble really looks like!
It would be a scenario that no government, central bank or globe-trotting Nicolas Sarkozy could solve - or even help.
So are we living in a dream land? Are stock markets unaware of the real risks? Or is it actually priced in already?
Who can say, but now is not a good time to be an investor. Or a saver. Or a taxpayer. Or anyone with any real financial means.