UK will probably have to inject £25bn to Barclays, Llloyds+HBOS, and RBS to get their Tier 1 Capital up to 7.5% from below 6

My thoughts for weeks now have been: How to get water out of system with least damage.

America NEEDS a recession to change consumption and savings patterns and reduce personal debt.

The talk about developing world taking up economic gap created by that recession looked doubtful to me after meeting A. in Zurich in March, when he told me of what was going on in his part of China, still the largest engine of that boom. He made a subsequent tour so to make sure just not his industry.

Taking into account PPP differences USA and Europe, Russia, etc. seemed to me at 1.55 to Euro $US undervalued at least 20%.

So my guess was US$ up 20% within 2 years, stock market to settle at 20% off top for Dow type companies, collapse of commodity bubble with oil at $100 or less by year end.

The nightmare scenario, collapse of $US, runaway inflation, commodity prices sky high in $US, sovereign funds etc. dumping $US in a panic and so on.

The most benign scenario, steady or stronger $, collapse speculation induced commodity bubble, housing settling down 20-50% depending on where rose most. This happening in second half of 2008. Spec financial time bombs finally mostly going off in same period. Much steadier situation first half 2009, and then SLOW recovery starting second half 2009.

My uneducated view is the MOST benign scenario taking place before our eyes.

Credit crunch. As other countries now also involved will be cured MORE quickly. In the end they have to lend money to make a living, not put it under the mattress. Were too easy, lost money, so first reaction too tough, but the overhead goes on. Both ups and downs OVERSHOOT.

If Obama gets in, yes another very tough few months, but no disaster.

G.

P.S., So far in my view it is the most benign scenario we are seeng, in view of lunacies of recent years.

On horizon next boom, the greening boom in America.

Ups AND downs overshoot, VERY short term. IF Obama gets in, and restores some sense of sanity, as I sit here today my view, the most realistic benign scenario is taking place.

Credit freeze. OF COURSE, too lax, lost money, now too cautious. But that is being solved. Other countries feeling effected is good news-it makes their gvts pitch in. I think this is short term the most easily solvable problem. In the end they are making a living, have huge overheads, by LENDING money, not by sitting on treasuries. Probably interest rates will now go down for a bit, and 100% safe they CANNOT AFFORD. Yes more losses to come from looney credits on cars, credit cards etc. The sooner the better.

I do not do market timing, The only call I have ever made on this blog was on the onset of the bear credit market, on July 11, 2007. I make calls only when I am highly certain and am explicit when I do so. I suggest you read the post.

The post in fact is arguing against market timing, that efforts to catch a stock market bottom will probably end in tears. And unless you lived through the late 1970s and early 1980s, Japan in the early 1990s or perhaps lived in one of the countries that was caught in the Asian crisis, it is unlikely that you know what the repudiation of equities looks like). It is beyond the personal experience of many readers. A whole generation has grown up with a near religion of stock ownership as safe, when 25 years of falling bond prices had much to do with their performance.

Benoit Mandelbrot has said that market are much, much riskier than the standard theories suggest. A lot of people are learning that lesson the hard way.