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Lehman Brothers II crisis is coming soon

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posted on Sep, 15 2011 @ 11:57 PM

Three years ago, the House of Lehman collapsed like a house of cards. And if you thought the original was scary, just wait until Lehman II comes to a theater near you — in IMAX 3D with digital surround sound.

That’s the view of sober-minded Canadian strategist and money manager John Stephenson, senior vice president of First Asset Management in Toronto.

He predicts a new, Lehman-like financial crisis in the next six to 12 months, only this time involving the debt of governments and European banks.

He thinks it could drive stocks much lower, to levels at which they traded, well, just after the collapse of Lehman and AIG in fall 2008.

“When it happens, it’s going to happen fast, and it’s going to be ugly and very deep,” he told me in a telephone interview, adding that he expects it to be “worse than the last crisis. Last time around, the governments had some room to bail people out. They don’t have that capacity [now].”...

Taking a page from the work of Carmen Reinhart and Kenneth Rogoff, Stephenson says the financial crisis first hit the private sector and then moved to the public arena as governments bailed out the banks to “save” the economy.

“A buildup in government debt has been a defining characteristic of the aftermath of banking crises for over a century, ” wrote Reinhart and Rogoff in their 2011 paper “A Decade of Debt.” “For the countries with systemic financial crises and/or sovereign-debt problems, average debt levels are up by about 134%.”

That puts a huge burden on taxpayers and makes the creditworthiness of sovereign debt shakier. “You’ve had a transfer of risk to governments,” Stephenson said. “The average citizen wonders why they’re going to have to suffer for someone else’s mistake.”...

“The only surprise is that it hasn’t happened sooner,” Stephenson said. “The pressure builds and the dam can’t hold.”

Regardless of whether anyone foresees such a catastrophic financial event on the horizon, Stephenson is very right where he says governments now have less ‘room’ and ‘capacity’ to contain another meltdown. I guess printing an eternity of money would hold off any immediate collapse but how far can that go before the dam breaks, so to speak? There are going to be very real repercussions at the level of main street where stabilising government debts are going to involve budget cuts which will invariably increase unemployment of which the private sector growth will also be undermined by slowing and contracting economies. Banks are again scrambling to remain viable and profitable and are cutting back many thousands of jobs as well, with job losses also spreading into other areas of the financial sector and beyond.

Elsewhere in the article Stephenson is quoted on a possible Greek default:

“Once the default occurs, it could be very easy to see a banking crisis in Europe become a banking crisis in the U.S., Canada, and Australia,” he said.

The threat of contagion is a very real possibility if a Lehman II situation unfolds and could well spread around the world.

posted on Sep, 16 2011 @ 12:37 AM
What goes up must come down...they keep pumping fake money into the world economy to try and keep the party going...but it's 6:30AM, the DJ left and they're out of

What I really want to know is what's going to happen to precious metals, gold, silver, - are they going to bite the dust just like in 2008 or "is this time different"

I've been agonizing over whether or not I should sell in the next month and have some cash to jump back in if it crashes or hang onto it in case it spikes...decisions.

edit on 16-9-2011 by coldkidc because: Vauge analogies suck

posted on Sep, 16 2011 @ 12:42 AM
Lehman Brothers x 100
Big banks in Europe and US going down, add the Greek bankrupcy and possibly italy& spain. Euro is finished.

Lets see what comes out of this!

posted on Sep, 16 2011 @ 03:40 AM
Australia? Not a chance. If you listen to our Treasurer we are safe as can be.
Somehow he forgets about the $870 Billion in private debt here.
Not much for 23 million people to pay back

posted on Sep, 16 2011 @ 12:04 PM
I sure am glad that I lost faith in the financial system many years ago. I don't invest my money in the traditional sense. I just use my money to make more money by buying and selling things (cars, antiques, etc), and yes, I know that is technically an "investment". I wish I would have bought gold, but I just don'y have enough faith in that to make the leap of actually buying some. I was alive back when gold spiked in the early 80's and I remember how fast it crashed, so I just don't have any faith in that either.

What I do have faith in is something like a 1999 Saturn. I can buy one for a couple hundred bucks, spend a couple hundred and a few hours of my time to fix it, then sell it for $2000. It's a quick turnaround, an incredible return on investment, and I help someone that needs cheap, dependable transportation.

The financial markets are a scam and I don't play rigged games.

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