'Credit Crunch' - Is it ALL bad???

  DANZIG 07:58 07 Oct 08
Locked

Interesting question on BBC breakfast this morning. Is all the doom and gloom that surrounds the current financial situation a bit OTT or is it simply a case that bad news sells better?

Are there any good things that are coming out of this situation or am I being naive?

  GANDALF <|:-)> 08:31 07 Oct 08

People have finally realised that the days of cheap, easily available credit are over.Banks have realised that irresponsible lending to self assessment and BTL investors mixed with rather odd inter-bank financial packages were probably not a sustainable idea.

A lot of people have based their 'wealth' on the value of their property which is always intrinsic or their ability to hold a job so that loans can be serviced. These people gambled for high stakes in a complicated market which was never geared to individual investors. Curiously the same people would recoil in horror if you asked them to put £50 to win on a nag in the 2.40...which is probably a better, fairer sided bet.

There are also a lot of redundancies looming and people tend to be cautious as no one is really safe. The problem is that the market has been talked up beyond belief during the last 10 years (Tulipomania and The South Sea Bubble spring readily to mind when the manufacturing base, which provides real wealth, has greatly diminished in the West) Scraps of paper suddenly had high and improbable values. hedge funds have been *ahem* investing in businesses for their hapless clients and paying 10 times the best market value (Fat Face and PizzaLand) for compnies that are wide open to competition and people's foibles. When someone actually realised that these papers were actually worthless (an Emperor's new clothes moment)then the whole, rather shaky house of cards collapsed. When commentators talk of 'a generation' to sort this out, they are not far off the mark as this really is a sorry state of affairs compounded by people not being able to, or wanting to, see the real situation. People warning of this approaching cloud were often labelled 'doom mongers' and 'talking the market down' If a market is that unstable to be affected by individual's views, then the problem is a little deeper. I'm afraid confidence and optimism is what got us into this and you cannot buy your weekly shop from Waitrose with either.

The real test will come at the end of this month when banks have to settle their Credit Discharge Waiver bills. basically they have been insuring themselves against losses in a style that one has to raise the old eyebrow about. The amount of liability is greater than the GDP of the World...$68 trillion. The financiers in The markets in The States know this which is why the markets slipped further when Bush announced a $700 billion rescue plan, which is errrrrm, 1% of
the highly toxic debt.

Should be an interesting time around Hallow e'en then.

G

  Quickbeam 08:37 07 Oct 08

I did well to stop using credit cards about 4 years ago, and started saving up for things again...

  interzone55 08:39 07 Oct 08

I thought the most interesting thing on this morning's news was that BHS have made £30m profit. This is a good sign apparently, but Mark's & Spencer's £900m profit was a sign of recession looming.

Now explain that one...

  newman35 08:41 07 Oct 08

Good - house prices get an injection of reality.

Bad - mass unemployment means few will be able to take advantage of the 'good'.

  GRIDD 09:16 07 Oct 08

alan14 sales are down on the UK part of that.... it's the International activity that's holding it up.

Not only are sales (money taken) down but profit margins too as they've been continually offering low price deals like the "£10 dine in for 2".

I can't remember but I beleive last's years figures where substantially higher than £900m.

  GRIDD 09:19 07 Oct 08

Appologies for the poor grammar.

  GANDALF <|:-)> 09:52 07 Oct 08

ooops.....'Credit Default Swaps' instead of 'Credit Discharge Waiver'.

'Economies such as the USA and the UK are resilient and we will come through this'..with a greatly reduced manufacturing industry and economies that rely on debt-servicing, how will this be achieved?

G

  spuds 12:13 07 Oct 08

I can honestly state that I might have upset one or more major supermarkets profit margins.

Twice within the past week I have had to queue at customers services and ask for my money back, on overcharged items.
...........

Reading a finance report yesterday, it could well be that some major companies might not have a very good Christmas. Withdrawal of Guarantee bonds and payment before supply, seems to be heading into the commercial markets.

  peter99co 12:23 07 Oct 08

Expectations are now growing that the Bank of England will cut UK rates from their current level of 5% later this week.


click here


Not good news for savings but can help business
If inflation stays as it is of course.

Is it possible Alister could take back interest rate control from the Bank of England?

  DANZIG 14:29 07 Oct 08

How about we cancel the Olympics???

Theres another few billion to play around with....

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