Another blog today
An Intercept article just posted ends with the line ‘loan quality is laid bare by Covid-19.’ This comes after a report on how commercial business loans are being traded in the US just as sub-prime mortgages were 12 years ago. It has been suggested that financial cycles tend these days to run in 10 to 12 year cycles, so even without Covid we may reasonably have shortly expected what is euphemistically known as a ’correction.’ But Covid has intervened to make that almost a dead certainty. The Intercept article focuses on research that shows Wall Street was up to its old tricks well before the pandemic, the old trick being of course to inflate real estate values to boost the value of bundled up derivatives to be sold on to investors who failed to perform due diligence. The author of this latest research has submitted a complaint to the US Securities and Exchange Commission (SEC) and it will be interesting to see how they react. This is the same regulatory body which the recently deceased Ponzi scheme tycoon Bernie Madoff had such fun with.
We aren’t out of the pandemic yet, and as things stand it is clear that a lot of commercial enterprises have only been kept going on a taxpayer funded life support machine. Coupled with the devastation of the high street and retail sector, you’d imagine the commercial property market must be on the edge of a precipice. How many valuations are about to be written down, especially those with astronomical values in big city centres which have fared worst? An already over inflated market coupled with a sudden bubble bursting phenomenon like Covid must surely point to some sort of financial collapse, not even taking into account the borrowing forced by the pandemic. The response to the last financial crisis was austerity and now we can only wonder if Austerity II on a much more devastating scale is about to be unleashed. I would like to think that Joe Biden, with his total $3.9 trillion rebuilding programme understands the issue and so is intent on avoiding the austerity mistake, but our own bunch closer to home—what’s their big plan? And why isn’t Starmer setting out now Labour’s vision? How long does he think we’ve got to come up with something? All we seem to have had so far is the proposal that the public could spend some of their pandemic savings on Covid recovery bonds. Get a grip!!
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