The G20 Meeting - What Really Happened?

There are all kinds of positive statements coming out of this week’s G20 meeting in London. The media is encouraging us to believe that the crisis is behind us. The worst is over. A lot is being said that we are not hearing about.

We will see a lot more printing of money and the problems we have are going to get worse.

Something that has hardly been mentioned by the media is fact that the FASB (Financial Accounting Standards Board) has buckled under the banker’s persuasion to allow them to pretend that their assets are worth more than they really and they can inflate their earnings. This is quite unbelievable. Imagine if you or I were to say “oops, sorry, I made a few mistakes and I would now like to you forgive my loans and debts…please let me reflate my assets even though they are worthless.” What do you think the authorities would say? “No way!.” So why are we allowing our financial institutions to behave in this dishonest way? It beggars belief.

It’s as though the powers that be want to wish the problems away. Let’s sweep it all under the carpet. It’s shocking.

Let’s look at the consequences in a bit more details.

Say you paid $500000 for a property and you took out a 100% loan. The property is now worth $200000 and you are stuck with a $500000 debt. What incentive do you have to continue paying that debt forever and a day? None, I would think. So in the next 6-8 months, you can expect to see more and more people default on their loans thus giving the banks even more worthless assets to inflate on their balance sheets.

This is not going to go away. The sooner we wake up to the reality and start dealing with it, the better.