The global crunch-bunch panic attack

Like all of us, I’ve been watching the unfolding economic soap-opera with interest, surprise and a certain amount of anger. It’s really quite hard to know what to say about it but there are a few snippets of opinion that I’d like to spit out.

Firstly, can I make it known that when I was suffering the consequences of my own little financial crisis – nobody ever offered me a “bailout” or a “rescue package”!! This despite the remarkable similarities between mine and the world’s – trying to do more than you can really afford to do with a portion of stupid with unlucky sauce on the side. Anyway, I was pretty much invited to either clean up my own mess or go hang myself. Irrespective of how many rich people might suffer, I’d very much like the idiots who perpetrated this unholy mess to be given the same options that I was. I’d also like to volunteer to call them all every day to hassle them a bit about when we might be getting our money back and to hand deliver plenty of those snotty letters! Still, who gives a shit about people like me, eh?

When your mother-in-law (she’s made an appearance in two consecutive posts now, must be some kind of record) suddenly starts using finance-speak and moving some money to another Polish bank because they say they will protect more of your money if they go bust – you know this whole thing has gone WAY too far! This is a woman with relatively little money in a country that is relatively unaffected by what’s going on and yet she has managed to catch the same panic virus as the rest of the lunatics.

I blame the media. Have you been reading the news? Have you noticed how they are all just DYING for this to be Armageddon? They lead with sensational headlines like “Markets crash despite rescue plan” but when you read the article you realise that the markets “crashed” for an hour and then recovered. Stuff like “House prices suffer worst losses in history!” (this is the UK) because they have lost around 14% so far this year. They are not only being melodramatic but they are reporting the news with an amazingly short sighted perspective.

House prices have dropped 14% this year. Okay. So how many percent did they go up in the year before? Surely real estate is a long term investment, no? Certainly mortgages are long term so that might be a clue. So, taking a very conservative, lets say, five year view on the housing market, what is the value of those properties today compared to their value in 2003? I’m willing to bet that the answer is CONSIDERABLY higher. So what are you all so damned worried about then?!?!?!?

It’s not just real estate. Horror of horrors – the stock markets might drop to the same levels they were in 2003 (or whenever). So what? Isn’t there a standard warning that “The value of your investments may go down as well as up”? Well right now, they’re going down. Get used to it. There’s something to be said for learning a lesson the hard way.

Iceland. I always wondered how a lump of volcanic rock managed to become such an economic powerhouse. I mean, I know ‘Top Gear’ don’t pay that much and there’s only so much you do with fish so where was all the money coming from? Well now we know, there was no money, the whole thing was smoke & mirrors. Bye-bye Iceland!

Talking about Iceland, it seems that loads of English councils have chunks of their money invested in Icelandic banks. Last I saw the figure was around 1 billion quid! One billion quid up in a puff of smoke – surely this means the UK now owns Iceland?! The UK want their money back, Iceland is sticking its fingers in its ears and going “LA LA LA I can’t hear you”. Gordon Brown is not happy.

Funniest thing about this whole crisis panic recession disaster global thing is how we’re all getting used to very big numbers. Nothing is small any more, this is a very well-hung crisis. Who’s interested in the odd hundred million – petty cash that. To be impressive now what you need is a trillion!

And I keep reading how all the bonuses will be paid and the salaries of the high-flying financiers will not be affected because if we dared to tell them off they might all go to China, or some other place with open arms and deep pockets just dying for a crisis of their own. I’ll buy them all a ticket if you like.

What this panic attack needs is for God to come down look all these idiots in the eye and say “Now go and stand in the corner, take a deep breath and think very hard about what a bad children you’ve all been!”.

Anyway, that’s my 2p.

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9 thoughts on “The global crunch-bunch panic attack

  1. In China all the western managers would be dead men now, and their kidneys sold back to Europe…

    This perverted new economy is like communism. Nobody was responsible for anything. Like in Poland 30yrs ago.

    What we need is less managers and more owners. Managers have the mentality and like Communist apparatchiks…100% power 0% responsibility.

  2. Scatts, the jingling of your 2p and one of my 2p are identical. We have 4p available now — let’s invest them while the stocks are down and profits should come in plenty on the rebound – then let’s buy a gun to take our revenge on panic-raising scumsters.

  3. Here’s an article http://www.spectator.co.uk/print/the-magazine/features/2189196/clinton-democrats-are-to-blame-for-the-credit-crunch.thtml that blames the democrats – fat good of course that is to those who have or will lose money.

    I’m still trying to get my head round the workingsof this crash. Am i understanding it correctly that we have situation as follows

    1. Banks issue ‘cheap’ loans/mortgages and allow repetative refinansing of mortgages. Low income groups encouraged to take on expensive long term financial commitments. Property market overheats as property value grow too fast.

    2. Widespread default by low income loan/ mortgage holders creates financial hole as banks cannot recoup money by selling reposessed properties.

    3. Banks cannot repay loans from other banks. Banks cannot borrow money from other banks (too expensive) so banks cannot loan to punters/ businesses. Banks collapse.

    4. Domino effect on more banks and markets/ investments because confidence hit.

    5. Governments try to shore up interim by providing financial liquidity for banks by guaranteeing to provide lending to banks at cost to taxpayer (banks also nationalised to this purpose).

    6. Markets still drop. Ouch!

    Is this right? Is it the massive scale of mortage default that is so all encompassing? From many reports it would seem that it is not so much the losses as the potential losses that banks may bear. Hence the 700 billion package voted for in US does not mean that 700 billion will be forked out. It may be a lot less. Is this anywhere close to what’s happening?

  4. I’m not an expert, but I think an important part is missing. Something like:

    1.1 Mortgage lenders re-package the home loans made as investment instruments and sell them to financial organizations not normally too involved in residential loans thereby spreading exposure. The US Government fails to adequately oversee the re-packaging because regulations have not kept pace with the new instruments. Those who appraise the risk of various investments fail to understand (or lie – I’m not sure which) how risky these new instruments are and give them high ratings. The highly-rated instruments are then sold to investors around the world, spreading exposure beyond the US.

    1.2 The original mortgage lenders, their funds having been replenished by selling off the re-packaged loans, make more loans to a new round of under qualified borrowers.

    Somewhere in the background: a group of employees alerts management (was it Lehman?) to fraud being committed in mortgage lending by overstating borrower qualifications. Instead of addressing the problem, the employees are fired. They sue and win. This should have been a huge wake-up call to Government, but the Bush administration does nothing.

    Hope that is useful.

  5. Scatts –

    Your “nobody ever offered me a bailout” sentiment is shared by many over here. Let’s see if the Democrats are capable of making it the highly-effective campaign issue it should be.

  6. I read an article in the Spectator written by Rowan Williams, the Archbishop of Canterbury, a part of which goes;

    The biggest challenge in the present crisis is whether we can recover some sense of the connection between money and material reality – the production of specific things, the achievement of recognisably human goals that have something to do with a shared sense of what is good for the human community in the widest sense.

    The whole article made a lot of sense but I particularly liked that passage as it recognises just how very far away from any kind of reality this whole thing has drifted.

  7. Agree about panic mongering media. This week’s Warsaw Business Journal (you should know better guys!) has a terrifying article about massive numbers of Polish companies going bust – then in paragraph 94 you read that bankrupcies are actually ten per cent down on this time last year!

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