tag:blogger.com,1999:blog-5524682876220396502.post2749719126163781500..comments2024-03-27T06:56:10.255+00:00Comments on Broad Oak Magazine: Bank lending - can somebody please help?Unknownnoreply@blogger.comBlogger6125tag:blogger.com,1999:blog-5524682876220396502.post-71412606411149968882008-09-29T17:32:00.000+01:002008-09-29T17:32:00.000+01:00I fear your prediction may be correct, Anon. But i...I fear your prediction may be correct, Anon. But if it's become all about what the banks need, we need to reduce their field of operations. Anyone can have a high standard of living by spending money they don't have; by lifting us so high, the banks are threatening to half-kill us with the fall.Sackersonhttps://www.blogger.com/profile/09410040031410954403noreply@blogger.comtag:blogger.com,1999:blog-5524682876220396502.post-33516741293792274822008-09-29T11:03:00.000+01:002008-09-29T11:03:00.000+01:00Perhaps your comment should be "Given that banks c...Perhaps your comment should be "Given that banks can create efectively limitless supplies of debt IOU and pass them off as real wealth, what is there to stop the banks aquiring everything?". Ask the question this way and you will see that in principle the banks should be able to aquire all assets over time. <BR/><BR/>In practice the banks are not interested in aquiring everything. Their target is to make a profit. So they want people to take out debt and then pay it back with interest. After all, if we simply end up handing over our homes then there is no market for domestic property and these assets become worthless - which is not good news for the banks. 10% interest is ideal for the banks- a good return on capital employed. However, when governments push interest rates really low then the banks go for volume - if you force interest rates from 10% down to 5% then the banks must at least double the amount of debt they release into the economy to achieve the same profitability. Probably more like three times, to take account of their fixed overheads. Thus three times more debt is squeezed into the economy, mostly onto people and organisations that will struggle to pay it back<BR/>at 5% rates and will fail to pay it back completely at 10% rates. <BR/><BR/>The US has had gradually declining interest rates for 30 years, eventually reaching just 1% in 2001. This forced the banks to squeeze more cheap debt into the system, making everyone feel a bit richer as they own expensive property and cars bought on HP. However, now the banks cannot live with 1% rates and people that took out loans during the 1% era cannot repay, so the debt binge is forced to come to an end. <BR/><BR/>Fact is the US has had a standard of living much higher than Europe for the last 30 years based on taking on more and more debt. The economies should have converged. The debt has been used to buy a higher standard of living than the US citizen deserves for doing the same job. What the US will now do is print money to pay off the debt and the losers will be the foreign debt holders who will see their outstanding credits inflated into worthlessness.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5524682876220396502.post-76467778134953098692008-09-28T10:38:00.000+01:002008-09-28T10:38:00.000+01:00Patrick - there were winners in the Great Depressi...Patrick - there were winners in the Great Depression too - rmemeber the old cartoons where the ragged-assed poor watch the cigared rich whizz by in big saloon cars to the opera?Sackersonhttps://www.blogger.com/profile/09410040031410954403noreply@blogger.comtag:blogger.com,1999:blog-5524682876220396502.post-35639753274023509862008-09-28T10:36:00.000+01:002008-09-28T10:36:00.000+01:00I'm trying to draw an imaginary "normal" line on t...I'm trying to draw an imaginary "normal" line on that graph - maybe down to 175% of GDP AFTER an overshoot from the peak? It looks to me like musical chairs, this time with half the chairs removed at a go.<BR/><BR/>Dilemma time: either a very severe deflation where the cash holder is king (provided he got his cash out of the bank in time), or a desperate hyperinflation.<BR/><BR/>Or the start of one, followed by some of the other plus an attempt to prevent the currency being destroyed completely - skidding down the mountain with melting brakes. The last seems most plausible to me - it has the colour of the proposed bailout arrangement.<BR/><BR/>But what do I know?Sackersonhttps://www.blogger.com/profile/09410040031410954403noreply@blogger.comtag:blogger.com,1999:blog-5524682876220396502.post-42064562292548588872008-09-28T10:05:00.000+01:002008-09-28T10:05:00.000+01:00These sort of graphs scare the hell out of me. My ...These sort of graphs scare the hell out of me. My limited common sense says that what goes up must come down eventually. And there are only two ways for that to happen - either the economy manages a growth spurt with no extra debt (unlikely I'd say) or debt availability contracts rapidly (possibly happening now). Perhaps we are at the tipping point. Perhaps we are a year or so from entering a new Depression. Scary stuff.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5524682876220396502.post-20063658404580740612008-09-27T18:46:00.000+01:002008-09-27T18:46:00.000+01:00So, how bad is it reallyWell, it's certainly not b...<I>So, how bad is it really</I><BR/><BR/>Well, it's certainly <A HREF="http://lpuk.blogspot.com/2008/09/100-year-itch.html" REL="nofollow">not bad for everybody.</A>Anonymousnoreply@blogger.com