Comments: Still waiting for the credit crunch to bite

I suspect they know a great many things that we do not, but they don't wish to reveal them unless they are forced to! OTOH given their musings and the handling of NRK, one wonders just how close these guys really are to the banking system compared to, say, the Fed and its own banking system. If Bernanke is too much of an academic then surely Mervyn is even worse, although not burdened by an unhealthy obsession with the great depression, at least.

Merrills had a HUGE write-down last week (possibly after you wrote this piece) and there are certainly others to follow. The big investment banks have "marked to model" their portfolios hoping for a recovery in the credit markets before their year-end accounts are due and they have to get the auditors in. Their quarterly accounts are unaudited but their year-end ones are, and the auditors have been making noises about not allowing the "mark to model" fantasy-land to continue any longer. Some have talked about marking holdings to the ABX (which would mean catastrophic losses). Merrills are just the first to blink. Citi are having a meeting about this today, and GS and others are sure to follow. All of these banks have their year end coming up in the next couple of months. Only then will we really find out just how bad these losses are. I suspect once we do, the appetite for lending/credit will be significantly damaged.

ABX charts:

Posted by Minh at November 4, 2007 06:22 PM

No, I was aware of the writedowns but the point still stands - we're still waiting for decisive evidence of a significant UK economic impact. I'm not saying it won't happen but so far it is hard to see in the data.

Posted by David Smith at November 4, 2007 08:09 PM
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