rams a test for sub prime, page-13

commodorecaptain,

A couple of things. First, I didn't say that central bankers are incompenent civil servants. I pointed you to a quote from a senior British businessman, who relayed a conversation with senior Bank of England staff indicating they were not on top of the situation. I don't think Moulton was saying that these BoE people were incompetent - simply that they were out of touch and not as in control as their public utterances would have us believe. I intended to convey the fact that people shouldn't automatically assume that the RBA is in a different league than the BoE. My point was that it is dangerous to assume that the central banks of the world will come riding to the rescue here: some of them might well understand the situation better than others, but even for those who do, it's questionable whether they can save the situation.

Second, my point about lax liquidity (not lending) RBA standards was a reference to historical cycles, when commercial banks and the central banks were the main players. It was not a reference to what's happened in the latest cycle. [And my opinions on Basel II are not fit for polite company - even more so, given experiences of the past couple of months.]

At the end of the day, you and I have a difference of opinion as to how (and how long) this credit crunch will continue to play out. You say relatively short-term, with incremental improvements, easing to business approaching as usual within a few months. You base that on what's happened in the past and your assessment of present circumstances.

I say, it's not your parent's credit crunch, nor their real estate or funding market. Therefore, it will go on for longer and be far nastier than most people believe.

We could argue all day and we'd come back to those fundamental differences of opinion. However, because neither of us has a crystal ball, we can only wait and see how it plays out.

While I'm positioned (hopefully) to protect myself, I truly hope you're right and I'm wrong. Because, if I'm right, a lot of people I know will be in deep strife.