# Credit Crunch - Dispatches ON NOW!



## DizziSquirrel (Feb 15, 2005)

Credit Crunch - Dispatches ON NOW - anyone watching 

~Dizzi~


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## Lorna (Apr 8, 2004)

I completely missed the dispatches program, but if anyone wants to give a resume, I'd love to hear.

I find some useful videos on Youtube to watch are:
Money as Debt - this explains about "fiat" currency, which is what the pound, the dollar etc. are.  Fascinating and frightening, when you realise that the pound in your pocket is only worth one pound, so long as the general population believe it is worth one pound.  If everyone stopped believing in money,  then your pound coin would be  just a lump of metal.  And other currencies have suffered from the loss of belief in the past.  

And if you want a lighthearted explanation of the credit crunch mess, go watch 
Bird and Fortune
who have created a raft of comedy sketches about the whole financial mess.  Very funny, but the comedy duo have hit the nail on the head as to why this mess exists.

After having watched these videos, I was able to talk intelligently to someone who works in the city, about the credit crunch.  I could use all the right terms.

Lorna


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## Lorna (Apr 8, 2004)

wouldloveababycat 

The press might be picking up the more salacious points, and publishing them, but there is plenty of bad news to go around.  IMO, you should be nervous.

In the late 1990s, Clinton removed some restrictions on the banking sector.  Bush could have reinstated them, but they made huge profits, for some very rich and powerful people, so he didn’t.

With the brakes off, the banks were able to lend money to whoever they wanted to, and they did.  They lent massive amounts of money to people they shouldn’t.  The banks then cleverly repackaged these high risk (never to be paid back) loans, gave them excellent names, got the people who insure these loans in case people default, to give them a AAA rating, and sold the loans on to banks around the world.  The banks who bought these “new style” loans, didn’t check what they were buying. There is some doubt as to whether they could have.  Most banks weren’t concerned, the loans were insured, and they still weren’t concerned, when the companies that insure these loans went under, as the loans were secured against property, and house prices always go up.  The above is the simplified version of what has gone, on.  If you look closely it get s a lot more complicated!

In the short term, *all* banks made obscene profits, and bankers took massive bonuses.  Unfortunately their greed and stupidity have created a mess, that no one understands.

The situation is now, that banks worldwide, haven’t got a clue, about what is going on.  They don’t know, who will pay back a loan, and who won’t.  This means, that no one in the world knows just how much bad debt there is out there, and when the debtors will default.  They just know there is a phenomenal amount of bad debt.  (Bird and Fortune videos)

Add in the fact that that both Clinton and Bush twiddled with the US economy to make things better in the short term, but worse in the longer term, that Bush has dramatically increased the US national debt., plus…….. and it is no wonder that some experts are predicting that this recession is going to be much much worse, than anything we have known.  They are saying, that it is decades since things have been this bad.

And an awful lot of people are very scared, as there is a very real possibility, that the world could sink into another great depression, or the US(UK) could become another Argentina.

And how long before things get better?  We don’t know.

We don’t know how bad things are.  We haven’t got a clue what is waiting in the wings.  We don’t know where the next major financial disaster will occur.  So how on earth can we begin to make plans to sort this mess out?  And until the world has some idea, of just how many piles of evil smelling brown stuff there are, and how big each pile is, we can’t begin to shovel the mess up……Hire the earth moving equipment….

Why should be concerned about another great depression, or the US(UK) being another Argentina.  Well the great depression occurred, because people lost faith in the “fiat” currency, the dollar, and went back to barter.  It took a war to pull the world out of that.

And more recently, in the late 1990’s the Argentinean economy collapsed.  Argentina was a prosperous country, with a democratically elected, free spending government.  See any parallels between the US (UK) and Argentina?  The Argentinean government went bust.  Nobody would accept Argentinean currency.  The country couldn’t buy anything on the world market.  It took Argentina, about 5 years to climb out of the hole, two of them were unbelievably bad.  Read people’s blogs, if you want to know more.

What would happen if the UK government went bust?  Well we couldn’t buy anything from abroad.  Most of our energy comes from overseas, so that means massive hikes in the price of electricity, petrol, etc.; coupled with rolling, lengthy power cuts, petrol rationing, etc..  The protestors who got away with damaging the coal fire power station, may have been saving environment, but if the UK wants energy independence, then we *HAVE* to build a lot more coal fired power stations.

We also import about 35% of our food., and we use vast amounts of fuel, and/or electricity to produce the rest.  What do you think will happen to the amount/cost of food if the UK went bust?

In order to avoid another great depression, or the US(UK) becoming another Argentina, the US/UK (and other) governments are busy bailing out banks. and other financial institutions.

The UK national debt stands around 60 billion, or about 1000 pounds for every man woman and child in the UK.  All these bailouts are going to add massive amounts to the national debt(5x, 10x, ? ? ?), and the only way we can repay the national debt is to increase taxes.  You, I, every tax payer in this country, is going to have to pay for the greed, and stupidity of the bankers.

So why don’t governments, around the world, let the banks fail, after all, the banks acted irresponsibly?  The consequences of not bailing the banks out, are likely to be much, much worse than bailing the banks out.

And what is really worrying, is it might not be enough.  You see there has never been an economic crisis, where the price of oil is so high, *and* we have had to contend with climate change, *and* so much land worldwide is becoming unproductive, as it has been over farmed, *and*….

I know I hang out on Doomer boards, where everyone feeds off everyone else’s fears, but….at the moment the Doomer boards seem to be getting it right.

> it was only after we had it day after day after day that things started going pear shaped 
Things were going pear shaped long before the mainstream news picked it up.  Mainstream news reports what has happened.  Doomer boards talk about events that night happen in the future.  Doomer boards used to be able to predict things 6 months in the future, then it was 3 months.  Now we are down to 1-2 months ahead.  This says to me that the pace of the down turn is accelerating.  And there is an awful lot more bad news to come.

Things started going wrong for the UK, about 6 months after things started going pear shaped in the US.  The most optimistic forecasts say, the US, will start to climb out of its hole, early next year.

What does that mean for the UK?  Well the UK has at the very least, another year, of month on month increasing business failures, increasing unemployment, falling house prices, more personal bankruptcies, high inflation, and so on.  Things should then level out for a few months, and then things should start improving.

Unfortunately predicting economic upturns (and downturns) is notoriously difficult to do.  So, the, another 12 months of bad times, could turn into a lot longer, and possibly turn into unimaginably awful times.  That is what is scaring some really knowledgeable people right now.

> it was on just about every side tonight and sometimes you just want to switch 
> onto relaxing tv without this being shoved in our faces 

Yes, I would love sometimes to forget this happening.  Unfortunately it is.  And other people’s greed, and stupidity will cost me an awful lot.  Hopefully it will just be money, but I fear the price may be a whole lot higher!

Lorna


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