Thursday, December 20, 2007

Financial Meltdown or Just another "Crisis"

The Housing Bubble.  How does it measure up.  My favorite reference is a little monograph titled "Bank Failures in Mature Economies" put out by the Basal Bank of International Settlements.  Or just BIS.  This covers a lot of ground

  • The Herstatt crisis in Germany
  • The Banking Crisis in Norway
  • Bank Failures in Spain
  • The Swiss Case
  • UK Bank of Credit and Commerce International
  • UK Barings
  • US The Savings and Loan crisis
  • US Continental Illinois National Bank: the pitfalls of illiquidity
  • US Bank of New England: the perils of real estate lending
  • US The collapse of sub-prime lenders - sneak preview
  • The Banking Crisis in Norway
More to come.

Capital Vandalism

Capital vandalism is about the destruction of wealth.  This is a timely subject, since the U.S. financial system is under stress and the results of the housing bubble are popping up with frequency in main stream media.  Naturally, the most interesting and timely information is available on blogs.  In fact, the main stream media is becoming blogs at an alarming rate (see

Orders of Magnitude:
  • $1 - will almost buy a paper copy of the NYT
  • $10 - a trip to Starbucks with a little change left.
  • $100 - a tank of gas and lunch money. 
  • $1,000
  • $10,000
  • $100,000
  • $1,000,000 - Used to be associated with the concept of a millionaire.  Barely high net worth.
  • $10,000,000 - Start dreaming about fractional jet ownership.
  • $100,000,000 - Not like the rest of us.
  • $1,000,000,000 - A billion.  The basic unit of corporate finance.  
  • $10,000,000,000 - Cost of a smaller company that you may have heard of.
  • $100,000,000,000 - A big company you have heard of.
  • $1,000,000,000,000 - A trillion.  A material amount of money when talking about the US Economy.

The reason for the chart above, is that it gets damn confusing to talk about big numbers without a frame of reference.  Citibank loses another $billion - needs to be thought of in the context of their capital and what they said they earned last year ($20 billion).

The other bias of this blog is a historical point of view.  A lot of stuff that seems new has happened before.  The details are always different, but there are recurring themes.