'It's awful': 'Why didn't anyone see the credit crunch coming?' Queen asks economists

'It's awful': 'Why didn't anyone see the credit crunch coming?' Queen asks economists

www.dailymail.co.uk

Even the Queen has been hit by the credit crunch, but until now she has maintained her usual royal silence.

That ended abruptly today when she branded the crisis 'awful' and demanded to know why no one had seen it coming.

With typical understatement, she asked how come, since the meltdown was so massive: 'Why did nobody notice it?'

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Well,as the article says,its not often Queenie graces us with her views on such matters,so i guess this really does show the seriousness of the matter.

Professor Luis Garicano, director of research at the LSE's management department, said: 'The Queen asked me: "If these things were so large, how come everyone missed them?"'

Thats what the rest of us would like to know too;how can you not see something like this coming.

Is it down to simple human error?

Is it down to gross incompetence?

Or has it been allowed to happen by those shadowy figures behind the scenes?



www.dailymail.co.uk
(visit the link for the full news article)

You really going to beleive that the queen and her crownies, never even comtemplated this, thats bull.

Stop believing misdirection of these people.

reply to post by andy1033


I refer you to the last line of my post,the one about the shadowy figures.

That includes those connected to the crown.

It's called milking the cow till its last drop. Easy money. Turning a blind eye...etc... because in the end they know the government will jump in and help them out.

Politicians have known all along that people were living high on the hog on credit. However, many were making excellent profits off the interest and penalty fees they were charging. just another issue politicians chose to overlook.

where was phil when she said this?

i bet he would have had something very interesting to say


she probably checked he wasn't around at the time

the problem wasn't caused by the fact that no-one saw it coming, it was caused by the fact that they all saw it coming and thought that no-one else did. they were all banking on the stupidity of others, which was pretty....eh....stupid.

I've slugged this the plague of locusts (equating locusts here to hedge funds and private equity). This plague has been the primary, if not sole, reason we've seen one asset bubble after another for well more than a decade -- beginning with technology then leading to real estate.

The Queen, God save her, is just asking the wrong question. It should be, how could all of your blokes be so drunk on credit that you failed to remember economics 101.

Investors -- particularly high net worth families, pension funds and other institutional investors -- became hooked on fast rising returns during the dotcom bubble. When enough of this private capital came in, it created a situation where valuation of most internet companies and stocks was beyond any reasonable expectation that the money put in would ever be returned -- even if the tech company's wildest dreams were met. This drove up the price/earnings ratio of all of Wall Street, as charted here.

Once the bubble burst, billions of dollars were lost. The private capital percipitated this move-out and barely got out of the faltering market before 9/11 when the ground fell from beneath technology. Enter the second bubble. To prop up the ailing economy, brilliantly near-sighted and huberistic Alan Greenspan decided to slash interest rates to historic lows (right at 1%; sound familiar?). This had the net effect of making money -- and by extension, the dollar -- very cheap. The locusts now could leverage their vast reserves of capital using essentially free money. So, say a hedge fund with $10 million on its balance sheets could now realistically borrow another 100X that amount for little expense.

Oh, and 100X is actually extremely conservative, as one analyst pointed out the average hedge fund leverage was 3,000%! In other words, for every dollar a hedge held, it got a loan for $3,000.

Suddenly, private funds were cash rich, and desperate for a place to spend. Along comes the real estate lie. History had shown, until today, that real estate was able to show a steady, conservative return on the dollar over time, both commercial and residential properties. And what was better, unlike stocks, real estate is a limited commodity (you can't make more land, after all). Once banks got into the subprime game, the flood gates opened, and the locusts swarmed into real estate en masse, driving up values and prices to unprecedented proportions. This chugged along for nearly a decade, especially since hedge funds had an appetitie not for just owning the housing note of one single resident, but a pool of millions of residents, a commercial backed mortgage instument that promised to be like a bond -- returning a fixed amount because the risk was spread across millions of dollars worth of many properties instead of one.

This is a very long-winded explanation to get to your question: Why oil?
When the crash started late 2007, hedges and private equity saw the writing on the wall. And the locusts needed to get out and go elsewhere to get those short-term strong returns. Suddenly, commodities -- everything from oil and gas to lumber, corn, peas and freakin' carrots -- looked great. And their money dumped into that market in droves, driving up commodity prices to -- again -- unprecedented spikes. This is the reason we had $140 per barrel oil and corn and rice shortages. A story two years ago talking about hedge money moving into oil...

The reason commodity prices have crumbled is two-fold -- demand has significantly weakened as everyone in the world has become poorer (fueled by our depression). And second, hedge funds, facing an deluge of demand by account holders to cash out, have to liquidate to pay. So they attempted to drive up commodity prices, and then sell at the peak. And the overall depreciation of all assets is forcing even more selling by private equity funds as they struggle to drum up cash to pay back all those banks calling on their loans.