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The Rail
Ladies and Gents, we have a credit crunch
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Topic: Ladies and Gents, we have a credit crunch (Read 8291 times)
Bongo
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Re: Ladies and Gents, we have a credit crunch
«
Reply #15 on:
September 14, 2007, 12:35:09 PM »
Quote from: AndrewT on September 14, 2007, 12:10:33 PM
As someone who thinks that economics and finance are all smoke and mirrors and a house of cards just waiting to collapse, can someone tell me exactly why the BoE should bail out Northern Rock for what are, essentially, bad business decisions (lending money to people who can't afford it)?
Isn't the whole point of capitalism that it is a ruthless system in which bad business decisions are punished (through companies going bust etc).
It's not their loans which are bad, but the way NR itself finances them by borrowing from other commercial institutions. These lenders have crapped themselves after the US sub prime crisis and don't fancy lending money to anyone and so the NR can't carry on as normal.
That's my understanding anyway!
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TightEnd
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Re: Ladies and Gents, we have a credit crunch
«
Reply #16 on:
September 14, 2007, 12:36:38 PM »
Quote from: Bongo on September 14, 2007, 12:35:09 PM
Quote from: AndrewT on September 14, 2007, 12:10:33 PM
As someone who thinks that economics and finance are all smoke and mirrors and a house of cards just waiting to collapse, can someone tell me exactly why the BoE should bail out Northern Rock for what are, essentially, bad business decisions (lending money to people who can't afford it)?
Isn't the whole point of capitalism that it is a ruthless system in which bad business decisions are punished (through companies going bust etc).
It's not their loans which are bad, but the way NR itself finances them by borrowing from other commercial institutions. These lenders have crapped themselves after the US sub prime crisis and don't fancy lending money to anyone and so the NR can't carry on as normal.
That's my understanding anyway!
yes this is the whole "financial lending is a house of cards" point..once one too many cards is removed as has been the case in the US the system seizes up
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Robert HM
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Re: Ladies and Gents, we have a credit crunch
«
Reply #17 on:
September 14, 2007, 12:38:32 PM »
Quote from: AndrewT on September 14, 2007, 12:32:02 PM
Quote from: sovietsong on September 14, 2007, 12:21:10 PM
Quote from: AndrewT on September 14, 2007, 12:10:33 PM
As someone who thinks that economics and finance are all smoke and mirrors and a house of cards just waiting to collapse, can someone tell me exactly why the BoE should bail out Northern Rock for what are, essentially, bad business decisions (lending money to people who can't afford it)?
Isn't the whole point of capitalism that it is a ruthless system in which bad business decisions are punished (through companies going bust etc).
If the BoE didnt bail them out the impact of them going bust would be much worse than lending them a few quid.
And the impact would be?
Chaos
Quote from: TightEnd on September 14, 2007, 12:34:28 PM
higher unemployment, far worse consumer confidence, recession
If depositors lose confidence in those they deposit with, the whole economy slows down dramatically
Its why the BOE acts as lender of last resort, not to bail out the company but to prevent it having to bail out the consumer
The company: almost certainly will get bought.
At an incredible bargain price
Quote from: Bongo on September 14, 2007, 12:35:09 PM
Quote from: AndrewT on September 14, 2007, 12:10:33 PM
As someone who thinks that economics and finance are all smoke and mirrors and a house of cards just waiting to collapse, can someone tell me exactly why the BoE should bail out Northern Rock for what are, essentially, bad business decisions (lending money to people who can't afford it)?
Isn't the whole point of capitalism that it is a ruthless system in which bad business decisions are punished (through companies going bust etc).
It's not their loans which are bad, but the way NR itself finances them by borrowing from other commercial institutions. These lenders have crapped themselves after the US sub prime crisis and don't fancy lending money to anyone and so the NR can't carry on as normal.
That's my understanding anyway!
Yes, it's just the cash flow that's the problem, they are solvent.
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Bongo
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Re: Ladies and Gents, we have a credit crunch
«
Reply #18 on:
September 14, 2007, 12:39:31 PM »
True, I was just saying it's not the NR lending money to people who can't afford it that has caused their current predicament.
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Graham C
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Re: Ladies and Gents, we have a credit crunch
«
Reply #19 on:
September 14, 2007, 12:41:02 PM »
Quote from: TheChipPrince on September 14, 2007, 12:02:21 PM
Enough of this legal mumbo jumbo, am i ever going to be able to afford a house or not?
Not unless you have a huge deposit and earn loads.
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TheChipPrince
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Re: Ladies and Gents, we have a credit crunch
«
Reply #20 on:
September 14, 2007, 12:42:40 PM »
Quote from: Silo Graham on September 14, 2007, 12:41:02 PM
Quote from: TheChipPrince on September 14, 2007, 12:02:21 PM
Enough of this legal mumbo jumbo, am i ever going to be able to afford a house or not?
Not unless you have a huge deposit and earn loads.
Oh thx Graham, dream killer...
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AndrewT
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Re: Ladies and Gents, we have a credit crunch
«
Reply #21 on:
September 14, 2007, 12:46:34 PM »
If the whole system is so precarious that one company going bust would lead to economic crisis surely it's going to fall down at some point anyway? Surely such a fragile system is not a desirable thing to base our whole lives on and it would be better long-term for it to fall apart, to be rebuilt in a better way?
And here's a selfish question. As someone who is debt free (no mortgage, credit cards etc) would it not be the case that what I stand to gain from a economic crisis (being able to afford a house, for example) outweighs what I could lose (slightly increased chance of losing my job and not being able to get another one of similar salary).
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Jon MW
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Re: Ladies and Gents, we have a credit crunch
«
Reply #22 on:
September 14, 2007, 12:48:25 PM »
Quote from: AndrewT on September 14, 2007, 12:46:34 PM
If the whole system is so precarious that one company going bust would lead to economic crisis ...
... but it won't go bust - because the BoE won't let it.
Therefore it's not precarious at all.
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TightEnd
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Re: Ladies and Gents, we have a credit crunch
«
Reply #23 on:
September 14, 2007, 12:49:18 PM »
Quote from: AndrewT on September 14, 2007, 12:46:34 PM
If the whole system is so precarious that one company going bust would lead to economic crisis surely it's going to fall down at some point anyway? Surely such a fragile system is not a desirable thing to base our whole lives on and it would be better long-term for it to fall apart, to be rebuilt in a better way?
And here's a selfish question. As someone who is debt free (no mortgage, credit cards etc) would it not be the case that what I stand to gain from a economic crisis (being able to afford a house, for example) outweighs what I could lose (slightly increased chance of losing my job and not being able to get another one of similar salary).
there were queues of depositors outside NR's this morning. Its not the system that is fragile as such as CONFIDENCE. without that, economic growth falters substantially
Selfishly, yes you are right.
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Graham C
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Re: Ladies and Gents, we have a credit crunch
«
Reply #24 on:
September 14, 2007, 12:50:52 PM »
Quote from: TheChipPrince on September 14, 2007, 12:42:40 PM
Quote from: Silo Graham on September 14, 2007, 12:41:02 PM
Quote from: TheChipPrince on September 14, 2007, 12:02:21 PM
Enough of this legal mumbo jumbo, am i ever going to be able to afford a house or not?
Not unless you have a huge deposit and earn loads.
Oh thx Graham, dream killer...
You can always get 6 times your salary and get one though, you'll just have to eat value baked beans as your staple diet
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jizzemm
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Re: Ladies and Gents, we have a credit crunch
«
Reply #25 on:
September 14, 2007, 12:51:19 PM »
Quote from: TheChipPrince on September 14, 2007, 12:42:40 PM
Quote from: Silo Graham on September 14, 2007, 12:41:02 PM
Quote from: TheChipPrince on September 14, 2007, 12:02:21 PM
Enough of this legal mumbo jumbo, am i ever going to be able to afford a house or not?
Not unless you have a huge deposit and earn loads.
Oh thx Graham, dream killer...
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AndrewT
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Re: Ladies and Gents, we have a credit crunch
«
Reply #26 on:
September 14, 2007, 12:51:50 PM »
Quote from: TightEnd on September 14, 2007, 12:49:18 PM
there were queues of depositors outside NR's this morning. Its not the system that is fragile as such as CONFIDENCE. without that, economic growth falters substantially
Selfishly, yes you are right.
They also switched their internet banking site off so people couldn't withdraw their money overnight...
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AndrewT
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Re: Ladies and Gents, we have a credit crunch
«
Reply #27 on:
September 14, 2007, 12:55:12 PM »
Quote from: Jon MW on September 14, 2007, 12:48:25 PM
Quote from: AndrewT on September 14, 2007, 12:46:34 PM
If the whole system is so precarious that one company going bust would lead to economic crisis ...
... but it won't go bust - because the BoE won't let it.
Therefore it's not precarious at all.
Where does the BoE get its money from? Is it us, taxpayers?
Apologies for all the simple simon questions, but this whole thing utterly baffles me - I strongly think that economics and global finance share many characteristics of organised religion (essentially a pyramid scheme of confidence and beliefs) and so I want to understand if there are concrete facts which underpin everything.
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kinboshi
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We go again.
Re: Ladies and Gents, we have a credit crunch
«
Reply #28 on:
September 14, 2007, 01:00:22 PM »
Quote from: AndrewT on September 14, 2007, 12:55:12 PM
Quote from: Jon MW on September 14, 2007, 12:48:25 PM
Quote from: AndrewT on September 14, 2007, 12:46:34 PM
If the whole system is so precarious that one company going bust would lead to economic crisis ...
... but it won't go bust - because the BoE won't let it.
Therefore it's not precarious at all.
Where does the BoE get its money from? Is it us, taxpayers?
Apologies for all the simple simon questions, but this whole thing utterly baffles me - I strongly think that economics and global finance share many characteristics of organised religion (essentially a pyramid scheme of confidence and beliefs) and so I want to understand if there are concrete facts which underpin everything.
Except there is evidence for the existence of money. Well some of it.
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kinboshi
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We go again.
Re: Ladies and Gents, we have a credit crunch
«
Reply #29 on:
September 14, 2007, 01:01:22 PM »
Quote from: Silo Graham on September 14, 2007, 12:41:02 PM
Quote from: TheChipPrince on September 14, 2007, 12:02:21 PM
Enough of this legal mumbo jumbo, am i ever going to be able to afford a house or not?
Not unless you have a huge deposit and earn loads.
You actually want a crash in the housing market. That will help many first-time buyers and those trying to move up the housing ladder.
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