Lehman Brothers Collapse

[Mutley]

Irish government guarantees banks

Clicky

 

Covers branches over here too.

 

New press release

 

http://www.angloirishbank.com/Media-Centre...ance_Deeds.html

[bluemonday]

Well that's some good news.

 

However, judging by what I've read over the weekend, online and off, there's a growing feeling that seems to be expecting some hedge funds and insurance companies to start having severe problems shortly.

 

One instance - http://business.timesonline.co.uk/tol/busi...icle5014602.ece

 

I don't suppose anythings reliable at the moment.

[manshimajin]

Good to know that RBS are cutting bonuses by 20%.

 

RBS Bonuses

 

After all the division they are to be paid in only lost £5.9 billion.

A source said: "I think everybody would expect (that those responsible for write downs) would not get a bonus. But there are people who still made fairly substantial money in other product areas – you cannot just not pay them bonuses, they will just go elsewhere."

 

I guess I would expect that if I was working for a company that had such huge losses due to management incompetence and lack of risk management expertise and that was requiring a government bail out to stay afloat I'd count myself lucky to still be in a job. Then I am not a banker.

 

This attitude that "my bit of the business is doing well even if the whole ship is sinking - so I should get paid bonuses" is bizarre. As Jack Welch used to say at GE people who achieve good results but whose values are poor become toxic to the organisation. Could be healthy for RBS to let them go elsewhere if that is their value set - nobody is irreplaceable.

 

Presumably this is ultimately being paid for by the UK taxpers and by the RBA shareholders through further dilution of their shares?

[Chinahand]

Someone posted a link to a You tube video a while ago that explains the way the banking system works in laymans terms. I wanted to send it to my nephew who's getting to that age where he's interested in the news. Anyone help with the link as I can't find it. Cheers.

I can't remember this, if anyone does post it up, I'd be interested.

 

I went on Youtube and had a look - thousands of videos all about conspiracies and the Fed taking over the world and how we must bring back the Gold Standard. If you want to see what I think about such things I blogged my criticisms about a pretty representative example here!

 

These are are a few which I thought worth sharing.

 

The Old and Cheesey - what banks do

 

The Bit Complex - how banks create money

 

- how banks create money 2 - also how they destroy it.

 

- More money creation!

 

- how the central bank changes interest rates.

 

Tell us which ones you like or otherwise!

Resurecting an old thread - but thought this Youtube clip explaining CDOs was excellent.

 

While this one from Fox News is trully sobering: Peter Schiff consistently gets it right as the Fox News pundits recommend people buy Financials, predict booms and laugh and laugh at his worries over the economy.

[Albert Tatlock]

While this one from Fox News is trully sobering: Peter Schiff consistently gets it right as the Fox News pundits recommend people buy Financials, predict booms and laugh and laugh at his worries over the economy.

Cough! I know just how he feels. Haven't the UK, US and European taxpayers just put in £billions to replace 'imaginary' money in the banks?

 

...(sorry for the big post).

 

It's time that banks and mortgage lending were very heavily regulated in line with earnings, and imaginary money taken out of the system. You can rely on greedy banks to cock up every economic cycle - and take the lot of us down with them - and a desperate government to hide behind such a 'smoke and mirrors economy' in an attempt to tell us how 'better off we are'.

 

I feel so sorry for many people with big mortgages (some very many times their earnings). Why is it we learn so little from every economic cycle and let the banks get away with so much? Banks are only businesses

 

 

Albert I don't know what you think money is - but your claim that there is imaginary money that can be taken out of the system (leaving only REAL money behind) is just cloud cookcoo land!

 

... ...

 

Albert you are spreading disinformation - silly.

 

 

What Roger and Albert and co seem to be missing here is that the economic predictors of a crash just aren't there this time around.

 

The potential is certainly there for a slowdown in rises, for a levelling off, or even for a modest downwards correction, but there's no historical precedent for the situation we're in now being indicative of a crash.

That is simply not true and, sorry, but I think you are deluding yourself. I am commenting from the economic view point, I already have a house, and am less likely to be affected by many with big mortgages.

 

I wouldn't wish a housing price crash on anyone, and am certainly not 'holding out' for one. But some people are ignoring some basic economic fundamentals.

 

1. UK house prices are at their most overvalued for 15 years

2. UK residents pay more tax than ever before and have higher utility bills than ever before (highest outgoings)

3. House prices are moving well beyond the reach of many families, which means everyday there are fewer new entrants to the market (e.g. only in the last 4 years, a fifth more of the population have lost the opportunity of getting on the ladder). Houses are less affordable when prices rise faster than earnings, which they are doing. First time buyers are at record lows now.

4. The average homebuyer is now borrowing 6.5 times their salary when buying property and banks are currently allowing this. Personal debt is now at £1300 billion. By not restricting borrowing by increasing interest rates, the banks are increasing the risk of a financial collapse.

5. Inflation is creeping up, interest rates are starting to rise, which means things are getting more expensive relative to earnings, which mean people have less spending power. Higher interest rates tend to trigger a reduction in consumer spending and cause the growth rate to fall.

6. Oil prices are fluctuating, and if they continue to rise this means that businesses will have to increase their costs and pass them onto customers. People will have less spending power and some businesses will start to close. If people buy less, the growth rate will fall, and again if the growth rate goes negative, we are in recession.

7. The house rental market is being artificially supported by migrant workers, many who couldn't dream of owning a house, send most of their money out of the country, and are only too willing to undercut British workers. If wages are forced down, people have less to spend.

 

Personally, I think house prices will rise for a year or more but so will interest rates (my guess is between 1% and 5% within 2 years). If people aren't restricted from borrowing such high amounts soon, the banks could risk end up losing a substantial element of the £1300 BILLION that currently represents personal debt in the UK, simply because some people will not be able to afford to pay it back. If the pound starts to fall against other currencies (likely at $2 to the £1 at present) they will have to increase interest rates anyway.

 

Instead of letting house prices rise sensibly there has been, once again, a rush to make as much money as possible by the UK banks while times are good. They are now lumbered with mega debts, which people seem to be paying back at present. However, once interest rates start rising and some people can't pay their mortgage, (and there are few fools wishing to take the risks of buying a property during a spate of interest rate rises) the housing market will start to stabilise and then fall. Remember, at any time your house is only 'worth' what people are willing to pay for it.

 

I just think high house prices add no value to the economy by taking money out of the economy. More than that it is 'money for nothing', unearned, unskilled and undeserved - and simply turns houses into 'investments' instead of homes. High house prices are lazy economics. The people who suffer from this are the ones starting out, the only ones that gain are landlords (and I have been one previously), the banks, the government and developers. By taking this money out of the economy, putting all of our eggs in one basket, high house prices put us all at risk.

 

If I had a large mortgage, now, whilst interest rates are low, I would be saving as much as I possibly could to cover the higher interest rate charges that are coming around the corner. I would also dump all my credit cards if I had any and do without luxuries (especially foreign goods). Of course it's a personal decision as to the risk of buying a house, but if I was a first time buyer I would be very wary at present and keeping a very close watch on all of these indicators.

 

All of the economic indicators for this to happen are present. Whether you wish to pretend they are not is down to you. Labour won't be bothered (in around 2009) when this starts to happen, and as a result I can see the UK getting a conservative government at the following general election, as once more we prove that 'the one thing we learn from history, is that we learn nothing from history' especially considering what happended in the 1970s, 80s and 90s'.

[Bombay Bad Boy]

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