CREDIT CRUNCH UNLIKELY TO BE ALLEVIATED AS THE PROPERTY CRASH WORSENS
Credit crunch unlikely to be alleviated as the property crash worsens and the banking crisis lurches from one bail out to another and builders, estate agents and property developers go to the wall
Start of article about the banking crisis.
Previous page about the credit crunch.
It will be a domino effect as one bank will cause the collapse of another and they all come crashing down to the ground. If this were to happen it will not just affect US banks, it will cause the crash of virtually every banking system in the world and obviously have dire consequences for all industries and economies. To put it in less technical terms; we will all be fucked.
Personally I couldn't care less as I am waterproofed to this happening and I will explain later and what you should do but it would have serious consequences for most people around the world; especially the poorest and most vulnerable; so let's hope it doesn't come to that.
However, if the US government agrees this knee jerk $700 billion salvage plan without putting in any controls over the banks, the consequences will be even worse and cause a world wide depression, the like of which we have never seen. If they simply throw money at the problem and buy the mortgage portfolios off the banks, the banks will simply use that money for their own ends and profits and not act responsibly. Banks by their very nature cannot act in anyone's interest other than their own.
We have already seen this with the UK government nationalising Northern Rock and the Bank of England lowering interest rates in the hope that Banks would become more lenient in their lending criteria. Both were huge mistakes and both totally misread the situation and I will tell you why.
Northern Rock was a major sub-prime lender; big in the buy to let mortgage market and happy to loan 100% of any valuation on a fixed interest basis. As these fixed interest mortgages have come up for renewal, anyone with a decent amount of equity in their property has been able to find other lenders keen to lend money to stable income people with plenty of equity in their property; it is safe, low risk lending. Anyone considered a risk or with low or negative equity in their property have been forced to stay with Northern Rock and accept their new terms.
On the face of it, you would think that Northern rock would be happy because they are able to charge higher rates of interest, but these homeowners are the very people who are handing back the keys and walking away, getting into arrears and being repossessed. In other words Northern Rock is most likely managing a mortgage base that is almost certainly tantamount to a pile of shit. Mark my words, the UK government are going to lose their taxpayers shed loads of money before this fiasco runs its course and the idiots who sanctioned this without looking at the future consequences are still steering the ship. I can't possibly be the only person who can see this can I?
Then I learned that the Bradford and Bingley has been nationalised with the profitable savings part of the company being sold to the Santander Bank and the unprofitable mortgage side with what are now being called toxic mortgages being taken over by the government. Like the Northern Rock, quality mortgagees will be encouraged to move on with the buy to let and 100% mortgages being left behind. This is another financial disaster in the making. There has to come a point where the taxpayer can no longer be expected to foot the bill for the inept and incompetent management of these banks.
The government of course is hoping that by propping up these banks, it will prevent others becoming victims; one bank going down because of the inter twined lending that has gone on between them all could cause others to go. However, you cannot keep bailing out banks without reaching a point where enough is enough and at that point the dominoes will fall anyway.
Did the banks reduce their lending rates in response to the Bank of England reducing their bank rate? No, of course they didn't, they did exactly the opposite and raised interest rates within days and have continued to do so. Why? Because they are lying, cheating bastards who have been lying and cheating each other and the Government about how serious their problems were and now they don't know who to trust and are just trying to hoard as much money as possible to prop up their crumbling halls.
Now the US government is doing more or less the same thing; bailing out the banks that have caused this problem in the hope that they will kick start the property markets again. It ain't going to happen, the banks are going to take the tax payers money and keep it for themselves until they are certain that property prices have fallen as far as they can.
Continue reading about the property crash.
Credit crunch unlikely to be alleviated as the property crash worsens and the banking crisis lurches from one bail out to another and builders, estate agents and property developers go to the wall
