So the financial institutions are in a bit of bother because they took on some bad debts. These bad debts have come back to bite them in the arse and once again the trading of bits of paper has been shown up as being risky.
It’s happened before with tech stocks, it will happen again with something else.
The thing that annoys me? A frankly massive amount of cash has been available to banks in the UK and worldwide to shore them up an ensure that the average guy in the street can get their savings out of their bank. How does the stock market react today? http://news.bbc.co.uk/1/hi/business/7662572.stm
The very same traders who are only too happy to swap bits of paper based on the potential future value of pork (and make considerable sums for themselves in the process) are now being the equivalent of the person at the newsagent who spends half an hour at the head of the queue umming and ahhing over whether to buy a Wispa (yay, Wispas are back).
The very people who have caused a lot of the problems by packaging bad debts as good are now sticking their heads in the sand and saying that they don’t want to play anymore. But you know what? It’s time to put your big boy pants on and earn your money by doing your job – keeping money flowing in the global economy.
It is no longer the case that “ordinary” people aren’t affected by what happens in the stock markets. Even those with no direct investments aren’t sheltered from risk with the value of pension funds being tied to stock values. Banks are now so scared that they just aren’t lending, and if they don’t get over it soon there are going to be a lot of small businesses failing because they can’t get a short-term loan to page wages all because they haven’t had their invoices paid yet (because that company can’t get a loan, etc.). Small business can take larger businesses down.
The housing market hasn’t slowed down. It’s stopped. If people can’t get a mortgage because the banks won’t lend out of fear then the only people able to buy are those who are cash rich. I can’t move purely because the people who have been interested in buying my house (and there has been positive feedback) can’t get a bank to stop sitting on their hands and actually loan out the money they have specifically been given to loan out.
Somebody needs to take the plunge and do something. I predict the first lender to start giving out decent mortgages again to get a lot of business (there are plenty of people looking to move, people who aren’t high risk) which will be good for them. People haven’t stopped wanting to buy houses, they’re just been prevented from doing so by a bunch of scared, chubby cats who are going to be getting supermarket brand food instead of the premium stuff for a while.
In other news I have been organising a convention, flying a Tiger Moth, and generally trying to get on with life (whilst being stuck in financial treacle).