Property prices will continue to fall despite the US $700 dollar bail out package to save the banking sector and the financial crisis is not going to go away overnight

As a small property investor having stopped buying property towards the end of 2005 because I knew that property prices were over inflated and a crash was imminent, I actually welcomed this latest property crash. Of course I have lost money on paper but as I don't borrow money to invest in property it is only a paper loss that I will recover and some when property prices start to rise again sometime after 2010. However, I am looking at moving back into the market now and I will explain why later.

Whilst other property investors were raising mortgages hand over fist and paying over the top for properties without any eye on the future, I was writing on this website that the banks were going to get their fingers burned. I didn't however envisage just how serious the banking crisis was going to be. I suppose I should have done because I knew that property couldn't continue to rise year on year and that some banks were over exposed in the mortgage sector but I had no knowledge of the irresponsible lending that was going on between these banks as they bundled up mortgage portfolios and sold them on.

FINANCIAL CRISIS

I'm not the only property investor that saw this financial crisis coming. Many of the more intelligent developers got out by selling properties and taking their profits ready to move back into the market when the crash happened. I suppose I could have done the same thing; but owning unencumbered properties with healthy rental incomes, I didn't see the need. I would certainly be sitting on more money in the bank at the moment which would have given me more buying power but I am not so sure that money in the bank is as healthy prospect right now.

US $700 DOLLAR BAIL OUT PACKAGE

Having rejected the first motion, the US House of representatives is likely to approve the $700 billion bail out package this time round. As distasteful as it is to many of them, they simply have no option. Failure to act now would cause a depression; the like of which would make the 1930's look like a minor glitch. This time round, the banks are too interwoven and exposed to world stock markets and would most likely bring companies down like a stack of cards.

Nor will this $700 billion dollars solve the problem in the long term. The banks will simply suck this money up like a sponge to prop up their other investments. They are not going to move back into the mortgage market or start lending money to businesses again until they feel certain that this crisis is over; and that is going to be a good few years.

BANKING CRISIS

When the Bank of England reduced interest rates in the hope that the banks; would follow suit what did the banks do? Not only did they not reduce interest rates, they actually increased them and have continued to do so. The banks job is to make money out of your success and failure; they will try and profit from every financial situation at what ever cost to you and the economy. When they get this $700 billion, they will do exactly the same thing.

The US knows this, they just aren't saying it because they know that if the banks go under they will take us all with them. The carrion that grow fat and rich out of wars and financial markets that actually achieve nothing but make money by moving money around have brought us all to the brink of financial ruin. Now the taxpayers, the majority of whom has never benefited from these invisible money barons are going to have to foot the bill for a long time. This $700 billion bail out package is just the tip of the iceberg and much more is going to need to be found to fill the black hole they have created.

Read on about the banking crisis.