A year ago financial hell broke loose..
..so this week we're looking back with you at how the credit crunch has affected you and trying to find out from those in the know when it's going to end.
A year ago the price of a barrel of oil was $72, now it's $125 (ish). A year ago Gordon Brown was a popular PM. A year ago house prices were soaring. How things change.
On Thursday's programme we want you to come on the radio and tell us how the financial squeeze is impacting on you, your job, your business, your bills, the value of your home. Post your story here and we hope to feature it on the radio later this week.
© MMIX~RS~q~RS~~RS~z~RS~37~RS~)
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Victoria, I will try and keep this brief :)
I am glad to see you are discussing the 'credit crunch'. I am posting to ask if you can try and make people understand the gravity of what is yet to happen. I say that because we have not begun to see the worst.
Here is an extract of a conversation between the current and previous heads of the Federal Reserve, Ben Bernanke, Alan Greenspan and Henry Paulson.
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Henry Paulson:
... To restore confidence — to prevent panic — we must present a united front, a single voice that resonates with the public, that’s credible, that can inspire, that can motivate investors to invest and banks to lend.
Fed Chairman Ben Bernanke:
I agree. We have to tell the truth. But there should be no rush to tell the whole truth. Always count your blessings, and do so publicly.
Former Fed Chairman Alan Greenspan:
Blessings? This is a disaster and it’s getting worse. The United States is living through a once-in-a-century crisis tied to the plunge in home prices, and those prices are nowhere near a bottom.
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...it continues...
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Paulson:
Agreed. But you and I also agree that we don’t have to be so blunt as to cause panic in the markets... ...Give people hope, damn it! Don’t run around talking about the housing market as a bottomless pit … or about the huge risks the Fed is taking by inserting itself into broker balance sheets … or about Fannie Mae being insolvent.
Greenspan:
The last of those three statements was not mine. BUT IT'S TRUE. FANNIE MAE IS INSOLVENT. And what you’re advocating — that we sugarcoat the realities even more than we normally do — is a huge mistake in its own right. The sooner people face the music, the sooner they’ll deal with it...
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one more quick quote
The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.
"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.
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What I think!
You do not have to read between the lines. Some economist believe that we can "talk ourselves into a recession". This is rubbish. It takes a bit more than talk.
I just hope that the discussion on thursdays show will not "sugarcoat the realities" as Greenspan put it.
What's next?
*A brief rally in the markets.
*MANY bank failures.
*The Dollar will probably fail.
*Oil will trade in Euros, like the proposed Iranian Oil Bourse.
*An inflationary depression.
*Civil unrest in the US.
I look forward to your show as always.
Bye!
J
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The Last Government Rescue
by Martin D. Weiss, Ph.D.
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Inflation and the credit crunch are very much related.
Inflation - what drives this for most of us is not the same as official figures. For most households, the big majority of what we spend is driven by just a handful of things:
Mortgage, food and drink, petrol, council tax, gas, electric, and with luck holidays.
That bundle has increased 15% at least for us in 12 months, and the smaller the income the bigger the % increase in basic household expenses becomes.
Credit crunch - our national growth over the last decade has largely been driven by all our consumer spending, much of it debt funded, and much due to house prices going from 3 or 4 times average wage to 6,7,8 times average wage. Now that lending bubble has burst, especially in the US.
Why exactly we think that working 40 years to pay off a massive mortgage makes life better for us, I still don't know.
It needs to take at least 10 years for house prices to get back to 2007 levels to level it back up. Negative equity meant we couldn't move in the 90's but we still had somewhere to live, and the next decade will see the same for lots of people again. Just give those who get in arrears time to get sorted instead of having the banks bounce us through loads of repossessions - at least we should make sure they are responsible in that after the money they made from allowing 6 times salary, self certified and 110% etc mortgages, topped up by their credit cards.
The real crunch of inflation, plus banks running out of money to lend us, means we have some major re-adjustments to make, both in what we do as households, and what government spends.
What counts socially is not forcing those who already cannot pay anymore to take all the pain when we are still a wealthy country. And while we are on it, do not short change health and education etc either - who would want to be Chancellor eh?
And at the same time as all of this, we have got a bigger wealth gap between the top 5% and the rest of us than we had 20 years ago.
The Government is not to blame for all of this - although equally its not blameless in much either. It is there to help sort it out, but in the last 12 months we lost 10p and gained retrospective car tax. No surprise in the Crewe and Glasgow elections then really, is it?
Dodgy times like this need strong leaders with clear thinking, and the next 12 months could well be tougher than the last year - so fingers crossed then!
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Talk of Fannie Mae and Freddie Macs financial fitness is now in the past.
September’s buzzword is 'bailout'.
The past few days have seen the Lehman collapse and the nationalisation of AIG. The FED reversing within hours of giving their word, as a tide of panic washed away the line in the sand they had drawn earlier.
There is more to come. Much more.
The official US National Debt is:
$9,695,993,400,000.00 approx (as of writing)
A number this big meaningless to everyone. It is just 'big'.
Here is how big.
If this debt were to be paid back at $1 Million a day, it would take 26,564 years to do so.
Now take into account that $9,695,993,400,000.00 or $9Trillion is the 'official' US national debt.
The real scale of the US national debt is $55 trillion dollars.
Now people are starting to beat the drum over the United Stages (the country) credit rating.
(See: Does the U.S. Have to Worry About Its Credit Rating?
http://seekingalpha.com/article/95991-does-the-u-s-have-to-worry-about-its-credit-rating )
The dollar itself is a seriously flawed currency. Backed by nothing but faith. Faith, which is no more.
My worries of people in the media who "sugar-coat the realities" have gone. They would look a fool to do so now.
The old system has died. The new system is being born. We the people do not know what that system is... yet. We are about to be allowed to see it for the first time.
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P.S.
Please check:
http://www.truthin2008.org/
Thanks
J
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