find interesting nuggets by digging around the websites of primary sources
like newspapers and magazines. Other times, you learn the facts through
trusted middlemen. In the case of the following post, "Banking System Losses to Hit
$1.6 Trillion?" you might say it's a case of thrice-removed sourcing. Yves Smith, the
publisher of Naked Capitalism, came across an item by Paul Kedrosky, publisher of Infectious Greed, who came across a report in a Swiss
newspaper (which he translated into English). A great many steps, but
certainly some information that was worth passing along.
Paul Kedrosky posted on a report
published in a Swiss paper (he courteously provided
the English translation) of the results of a study prepared for hedge fund
Bridgewater Associates that projects that total losses to the financial
system from the credit crisis will reach $1.6 trillion. Note that losses
taken to date are only $400 billion. This is consistent with the off-the-cuff
view of Ted Forstman in an interview with the
Wall Street Journal that we are only in the second inning of the
The IMF has forecast total losses from the credit contraction of $945 billion, and that
included damage to hedge funds and other investors, not to the financial
intermediaries that are an integral part of the functioning of advanced and
even not so advanced economies. By contrast, Goldman Sachs has put the likely
damage at $1.1 trillion, George Magus of UBS at $1 trillion, and hedge fund
manager John Paulson at $1.3 trillion. So this is far and away the grimmest
estimate to date, particularly given its focus on financial intermediaries.
Reader Dwight, who pointed out this post to us, wonders if this report (or
perhaps thinking along similar lines) is the basis for recent apocalyptic
calls from RBS, Barclays, Fortis. SocGen, and the BIS.
Michael J. Panzner
Editor, Financial Armageddon
Michael J. Panzner is a
25-year veteran of the global stock, bond, and currency markets and the
author of Financial Armageddon:
Protecting Your Future from Four Impending Catastrophes, published by Kaplan Publishing.