Testify!

MANIFESTO

This is chilling commentary from a man who a up until recently was dismissed as a quack. Lately, however, he is being hailed a prescient and traversing quite the lecture circuit, including the annual meetings of the IMF and World Bank, Davos, and today Congress. At 21 pages the testimony is not a quick read, but it is surprisingly easy to read. If you own a house, invest in stocks, or have a checking account it might be worth 20 minutes of your time. I know people hate spoilers, but here is how it ends:

What will be the consequence of losses of over $1 trillion and, possibly, as high as $2 trillion? That would wipe out most of the capital of most of the US banking system and lead most of US banks and mortgage lenders – that are massively exposed to real estate – to go belly up. You would then have a systemic banking crisis of proportions that would be several orders of magnitude larger than the S&L crisis, a crisis that ended up with a fiscal bailout cost of over $120 billion dollars. And the worrisome part of this scenario is that – with home prices likely to fall by 20% or more – this scenario of systemic banking crisis is becoming increasingly likely.