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Old 14.10.2008, 08:16
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Re: How Safe is UBS

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What happened was change reaction and the bad side of globalization...
-Banks growing to fast and not enough controlled by government
-Richer gets richer, public ... stay public...
-Bank crises, one of the 3 biggest banks in Iceland, Glitnir, got in trouble, government said they would buy 75% of the bank
-With these new, loners of Glitnir got afraid, stopped money flow to Glitnir -> Glitnir goes bankrupt
-Basicly everythings goes nuts... Landsbanki also gets bankrupt and Kaupthing is struggeling but get help from the government to survive
-Brown/Darling go crazy thowards Iceland and Icesave
-Kaupthing gets bankrupt
-Icelanders are broke...
Begga - unfortunately the Iceland conundrum was well known. Last may, William Buiter, a well known economist who also teaches at the London School of Economics, was indicating Iceland as an example of a central bank that would go bust (I will leave the technicalities aside). That's 5 months before the facts, and I don't think he just woke up to the idea the very day he wrote his piece (I will have to look for a link for it - it's called "Can Central Banks go Broke?"). Which means that the issue w/ the "Icebanks" and the ISK, etc was indeed well known beforehand.

But this begs another question: since so many economists and specialists who are close to the ear of those-in-power *knew* that this was a very clear danger, why wasn't anything done beforehand? Why did they allow the problem to escalate to the point where the clean-up could possibly be more expensive than a preventive solution?... :-/

Paul
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