Wednesday, 8th July 2020

This Month's Magazine
Who’s giving the bank a reference?

WhoÂ’s giving the bank a reference?

I have seen a few recessions in my time but this one takes the biscuit!

Just a few months ago there was a housing shortage; such was the demand for properties that prices rose to an extent beyond the reach of first time buyers. Well that was the news or the story that we were given at the time.

Now there is a surplus of houses and new building has slowed down because there is no market and prices are slumping fast.
Then the credit crunch comes along just to make sure that things stay that way so, even if the demand for properties still does exist, which it does, sales are obstructed by the banksÂ’ reluctance to lend.

Unfortunately the banks’ reluctance to lend money goes beyond mortgages; considering that most of the “good times” were built on credit, entire populations are in trouble, not just privately but in business too. Well, if you can’t borrow any more to keep going then you can’t keep going and if you can’t keep going you can’t pay for what you have previously borrowed, especially when the cost has gone up substantially.

As far as SpainÂ’s Costas are concerned, the problem is made worse by the fact that far too many have tried to exploit an imaginary market with the result that the existing surplus property stock has reached unreasonable proportions, leaving many with unfinished properties and debts they cannot meet.

We are told that the banks are to blame for acting irresponsibly and lending carelessly to borrowers who cannot repay, overlooking to mention that the repayment rate was increased beyond peopleÂ’s ability to repay. The net result of this is that the financial institutions have run out of money and their stock or security on properties is rapidly depleting in value because of the market situation so created. So, if all investors were to start drawing their funds from their accounts, the bank would not have sufficient funds to pay back what was not theirs in the first place, hence the problem with the Northern Rock and other banks that need to be rescued.


Personally I find all this rather difficult to believe at first face so now there is an added excuse to the effect that the level of irresponsibility of our bankers is not limited to their negligence in respect of their lending but also for being duped by American mortgage lenders into accepting packed investment under the false sense of security that they are secured on properties and offering these to solid investors. Unfortunately the property market in the States is in even worse shape than ours because it would seem that nobody is making mortgage repayments.

While house are being repossessed at vertigo rate, while businesses are falling off like flies every day, while people are losing their jobs, we are told that we are nowhere near a recession as yet and governments can manage to find billions to rescue the financial institutions. Where from? The tax payers of course! The poor devils who are losing their homes, their jobs, their businesses, their investments and cannot afford to pay any taxes; as a matter of fact they have to start leaning on the government for  social services support.

So where are all those billions coming from? Are we really being given the facts are we being treated as idiots and given yet another “cock & bull” story? What is really behind this crisis which has been predicted for a while and is now here with unnerving punctuality?
Is it conceivable that the great U.S. of A. is actually busted? We know they havenÂ’t got the gold to pay for all the dollars they have printed. Could this be another ploy bto save their precious dollar at the expense of the world? The U.S. and Britain, who did not join the Euro, while choosing to be the American lap dog, seem to be the only two countries making all the noises and affecting the economy in the rest of the world.

Has this something to do with the fact that the Euro is actually gaining strength? Is it to do with the fact that Iran is creating its own petrol market for sales in Euros rather than dollars? This is a serious threat to the Petro-Dollar, especially if the concept is favoured by European countries that are fed up with being bullied into buying oil in dollars to their own detriment. Could it be because Russia and China are considering joining the club?

I really do not know and cannot guess but I do know that banksÂ’ fat cats have always been there, even now when they should get a kick up their backside instead of bonuses. They have always lost money in the past at the expense of their savers and clients, so whatÂ’s so different now? One thing is certain, the next time a bank asks me for a reference before taking my hard earned money on deposit, I know exactly what I shall say.

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