tag:blogger.com,1999:blog-5524682876220396502.post7769937644956562126..comments2024-03-27T06:56:10.255+00:00Comments on Broad Oak Magazine: Bank crashes and the Basel AccordsUnknownnoreply@blogger.comBlogger2125tag:blogger.com,1999:blog-5524682876220396502.post-68782691397671602752008-11-24T16:47:00.000+00:002008-11-24T16:47:00.000+00:00Thanks for that, Anon, and many will second you. I...Thanks for that, Anon, and many will second you. I'm just wondering whether the accords gave the banks the chance to trim reserves even further to permit the lending spree.Sackersonhttps://www.blogger.com/profile/09410040031410954403noreply@blogger.comtag:blogger.com,1999:blog-5524682876220396502.post-71318642638174066812008-11-24T11:01:00.000+00:002008-11-24T11:01:00.000+00:00No, the current crisis was merely a symptom of the...No, the current crisis was merely a symptom of the attempt to lower interest rates centrally in order to force banks to spend more to get us through the last recession without pain (and thus still voting Labour). Banks need to shift a higher volume of loans if interest rates are reduced from say 10% to 5% - in fact double. They need to do this at a time when income from savings is low. In order to do this they must do the following:-<BR/><BR/>1] Sell loans to people that don't normally qualify for credit<BR/><BR/>2] Get the loans off their books so they can play the fractional reserve lending game without falling foul of the rules on holding reserves. <BR/><BR/>In order to achieve [1] they sold 125% loans to people that barely had an income and had a poor credit history. They gave away credit cards without doing credit checks, often with enormous credit limits. They gave people loans against mortgage equity so the average equity in the mortgage market fell dramatically. They bailed out failing companies for years getting dubious collateral in return. They funded mad "private equity" deals in the crazy belief that a management team with debt to pay will perform better than a management team with no debt to pay.<BR/><BR/>Its all down to a government that is quite mad enough to believe that you can stimulate an economy to avoid the pain of recession by reducing interest rates to ridiculous levels. Inspired by John Maynard Keynes. I go Labour through the last election and judging by the polls there is every chance it will do so again. I used to wonder how Goebbels got away with his lies to the German people towards the end of WWII, but now I have seen the same propaganda used here in the UK and it works a treat! There seems to be no limit to the dim-witted voters easily lead by a government hell-bent on keepng its hands on power. I look forward to buying their homes from under them in a few years time at knock down prices.Anonymousnoreply@blogger.com