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Countries at risk of bankruptcy from Pakistan to Baltics
Former Member
Posts: 1,876,323 The Mix Honorary Guru
Story.
Seems like it's not just Iceland, and I guess Argentina didn't learn any lessons from the last time. The CDS fallout from this coupled with Lehmans going TU will be immense and we'll find out tomorrow if the G7 can actually do anything to stop the bond markets going next. Yields on American treasuries were rocketing last week even as the stock market was collapsing, not a good combination I think capital flight has already started.
Seems like it's not just Iceland, and I guess Argentina didn't learn any lessons from the last time. The CDS fallout from this coupled with Lehmans going TU will be immense and we'll find out tomorrow if the G7 can actually do anything to stop the bond markets going next. Yields on American treasuries were rocketing last week even as the stock market was collapsing, not a good combination I think capital flight has already started.
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loans for almost any purpose!
It looks like the EU is guaranteeing interbank lending (I imagine US will follow shortly) with individual countries nationalising the banking sectors by stealth and guaranteeing all deposits. UK gov is throwing £50bn at the top 4 banks, nationalising HBOS and RBS in addition to Northern Rock and Bradford and Bingley, and underwriting rights issues to the rest. This isn't eliminating the problem merely shifting huge liabilites to the taxpayer and treasury bond investors will demand higher rates to compensate for the increased risk.
Iceland tried this last week and the krona lost 75% against the euro overnight, as a net importer this effectively cripples the economy with hyperinflation. so this isn't the smartest thing to do by any stretch of the imagination.
They could do far worse than give Carol Vorderman a call. She'd let them take all their debts, put them together and create an even larger debt.
I imagine Carol actually manning the Ocean finance phones whilst dreaming about what would have been if she'd just accepted that 90% paycut...
The people who manage to piss away billions of Pounds of profit and go to the verge of bankruptcy in barely a year have but very little right to tell others how to run their finances.
That's the thing though, they are all holding basically the same bits of paper they were a year ago, its just no one will buy them for the price they did. Its all down to confidence.
And who makes the interest for those high interest accounts? Strangely its not the cleaning staff.
If you want a pension, or you want a return on your savings you need people to gamble with your money. The rules on the gambling should be tighter, but they should definitely continue.
Money doesnt just grow like a plant?!
If you want a return on any investment you have to take risks, you have to invest in a company (buying shares when issued), or give out a loan, or buy a whole company...etc.
These are all risks, and they are all forms of gambling.
If you dont want someone to gamble with your money put it under your floor boards.
Yes, things could go wrong as well. But there is a world of difference between putting money in a fixed-interest conventional savings account, the capital and returns of which pretty much being guaranteed as long as the bank doesn't go bankrupt, and buying stock shares that have the potential of fantastic returns but could leave you seriously out of pocket just as easily.
Might as well go to Ladbrokes and have a laugh while I'm at it.
Which is a bloody gamble! You dont seem to understand the very nature of banking.
No investments, no interest, no risk. If you want to make money from your savings then you invest it somewhere else.
If my bank turned around and said that it was getting rid of all of it's investments and instead making money from charging a percentage on money coming into your account, and it was guaranteed zero risk, then i'd rather keep my money there and pay for the security.
Lending money to customers and using the interest charged as assets and gains is a quite different proposition from trading in medium and high risk trades for short term profit. Surely you can see that??
It is perfectly possible for a bank to make a profit and exist by simply doing a combination of what you suggest, and interest charged to borrowers. No share trading needed there.
Where do you think they get the interest from?
Let's see if I can pin this down.
1. Bank borrows money from the Bank of England at a set rate.
2. Bank then lends money to customers at a higher rate.
3. Profit is obtained by doing this.
In other words, sell something for a higher price than what you paid for from your supplier. Which is pretty much the main principle behind trading in all areas of business since the beginning.
What else is needed?
Aaah I understand - you want to deal with a credit problem by making them more dependent on lending credit.
The banks core business was taking money people invested with them, using it to buy shares and then paying you some of the dividend as interest. they've always been major share owners - in fact way before they (banks rather than building socities) got involved in mortgages and personal lending
I think it is bad, but I think at the same time it's easy to obsess over the current climate when really ups and downs are nothing new. Like I've said time and time again, so long as the farms keep growing food, and the shops keep selling it, the rest is just excess. The problem is most of our jobs are based on this. If one day everyone realises that we don't need all this 'stuff' they won't buy that BMW in the sales court, meaning all the factory workers and the sales workers are all out of work. There's no need for them to go work on the farm because tbh as things stand the food needs of at least the UK are met. Prices have risen but they're still cheaper than they were 50 years ago.
Things will get bad but they'll get better again. I don't think it's the government to blame or anything like that, it's just how the system works. Just like political systems tend to swing from left to right to left again.
It was the combination of blind stupidity and naked greed that made bankers relax their guidelines for lending credit from a responsible and strict case-to-case basis approach to a "borrow as much as you want, no questions asked, and let me suck you off while you sign the papers" attitude to lending. For which we find ourselves in the current pickle today.
But it's not what banks actually do though, is it?
They take money to invest - that has been there core business for years.
Actually even the credit boom (not as relaxed as you may think) has been fanastically good for the UK, allowing more businesses to expand and strengthen, to employ more people at higher wages and to pay more tax.
Depending on your figures 10-20% of UK tax revenue is from banks - we shouldn't let a recession blind us to that fact. in fact the major worry should be that we tie the hands of financial institutions so tightly that we minimise the amount we get in tax revenue so much that we badly damage our social infrastructure.
Only if we fall into the short term hysteria we're so fond off...
The FED is effectively the only one lending at the moment and the US has to raise $3trn just for the next fiscal year (and most of that into the short end) which is more than the entire current deficit of $2.7trn, where are they going to find the buyers? Their treasury bond auctions are already showing signs of dislocation, yield curve inversion etc...this is going to get very ugly if we don't force transparency to restore some confidence to the market soon. Banks are hoarding money and even big companies are struggling to roll commercial paper, let alone small businesses who can't run without credit.
Bush gave a trillion dollars to the richest one percent of the earths inhabitants when he first came to power.
He's just given them another trillion on leaving office.
Heres what those figures realy mean.
A million seconds is 12 days.
A billion seconds is 31 years.
A trillion seconds is 31,688 years.
A million minutes ago was – 1 year, 329 days, 10 hours and 40 minutes ago.
A billion minutes ago was just after the time of Christ.
A million hours ago was in 1885.
A billion hours ago man had not yet walked on earth.
A million dollars ago was five (5) seconds ago at the U.S. Treasury.
A billion dollars ago was late yesterday afternoon at the U.S. Treasury.
A trillion dollars is so large a number that only politicians
can use the term in conversation... probably because they
seldom think about what they are really saying.
mathematicians do not even use the term trillion!
One trillion seconds ago – 31,688 years – Neanderthals stalked the plains of Europe.
Does that make things clearer?
$10 trillion in one-dollar bills make a stack over 678,000 miles high. This is about three times the distance to the Moon.
$10 trillion in one-dollar bills taped end to end stretch almost 970 million miles. This is five round-trips to the Sun. It takes light almost an hour and a half to travel this distance.