Why Now; and MechaHillary

In the midst of last night's screed about the credit crunch, whores, coke, Yale, Minehead and semi demonic beings neither living nor dead, I fell to a-thinkin, which is never a good idea.  And my though was this: why now?  Why didn't the whole ridiculous, marvellous dance continue on and on?  Was it some kind of financial gravity that pulled us all to earth?  Did some derivative apple fall on Ben Bernanke's head?  Or to put it another way - if the whole thing was a confidence trick based on magic beans, why did it grind to a halt when it did?  I mean, we can nail the start of this thing to a particular day - the ninth of August 2007.

The truth of the matter is that I don't know, but I'm on the internet and so therefore will posit a theory which may or may not contain a grain of the eternal.  Anyway, this is how science works as Stuart and Karl Popper both assure me.

My theory is that it was driven by two main factors.  They are that a load of the cheapo deals that friend Cletus had taken out to buy his shack come to an end, and the second is the rise of commodity prices.

Mortgages deals first.  One of the more underhand tricks used by mortgages brokers in the US to get Cletus and his ilk (y'know, decent working people, young families, older folks who'd dreamed of owning their home, mugs like that) to buy, was to offer low low low introductory rates. Not low like you get in the UK, where the intro is 4% and the real rate 6%, but deals where when the intro wears off the repayments go up by between 60 and 150%.

Woah.  

Now I don't know about you, but if my mortgages payment went up by 150% I'd be eating out of a tin can.  These evil mortgages are called ARM, and we all of us are in ARMs way.  Sorry.  Anyway, the full sorry saga is in the previous link, which goes to that notorious hand wringing liberal journal, business week.  The other thing I'd point out is the date of the article - September 2006.  Bear mind as well, that even for people who had normal mortgages interest rates went up from 1% (which is better than free money because its below the rate of inflation!) to 5.35% between 04 and 06.

As business week reports, people whose mortgages are going up start to default, poisioning the well that feeds the magic beans.  Winter is coming.

Thing two is that around about this point, the price of stuff (or commodities, as they call it in financial circles) which had been going up for a bit, started to bite.  Inflation started to creep up.  Oil went up.  People whose budgets were based on a historical view of oil at $20 a barrel were looking down the barrel (sorry again) of $70 or $80.  There's less money to go round baby, let's stick the keys through the bank's letterbox and light out for the border.  Or go and stay at Mom's.

Part of this price rise was driven by ferocious demand from the Chinese.  Here is a picture of Chinese ships queuing up outside the coal port of Newcastle in Australia.  That's a lot of demand.  And part is the old ghost at the table, peak oil.

Anyway, that's my theory - mortgages got harder to repay and people bailed on 'em. This is down to increases in prices and stupid, stupid deals.  Fuck me, I'm brilliant.

But why the tenth?  That's the day it went public, when BNP Parabis, a big old French bank said they couldn't value their CDO's 'n' shit, because no one was buying or selling them anymore.  The magic had worn off the beans.  Before then, it had been boiling away for a bit.  A subprime lender had filed for bankruptcy.  The Fed said they thought the whole thing might cost the then large sum of $100bn.  Borrowing was hard to come by.  The music hadn't stopped, but it was going seriously out of tune, and yet while it was still playing people were still dancing.

MechaHillary

This excellent piece in Salon reflects on the feelings of a serious feminist about the Sarah Palin broohaha.  Now, I am not serious, but I am a little bit of a feminist, insofar as I think people should be judged on their merits, so I've got a refinement to the plan to offer.  Rather than Hillary Clinton stopping Palin, we need MechaHillary.  You know it makes sense.

Aaaaaalborg

The Danish Pepys might be distressed to learn that while the Wolves still ride high, Danish side Aalborg have been beaten tonight by Manchester United in a shock result.  Berbatov scored twice, his first goals for the club, which gives me a excuse to copy this picture of him.  What a snakey cool mutherfucker.  

Finally, thanks for reading and for your comments.  Figure I've got Sil to thank for the traffic.  Hope you enjoy it more than work.