Monday, October 20, 2008

Bale or bail?

I've been dipping into a few of the endless programmes about the collapse of the money markets.

One of the most interesting was on BBC Radio 4 yesterday, it dealt with allegations that some of our major retail banks and their insurers played a game of pass the parcel with highly toxic mortgage packages just prior to the crash. In effect they gave them a triple A risk rating, the lowest you can get, before selling them on to unsuspecting buyers.

Law suits are now pending in the USA against the banks involved.

I googled "market" and this is the definition given in the Financial Dictionary

"Market

The key to the free-enterprise system; a generic term for the arrangements by which people buy and sell things, usually with profit as the objective. Some markets have a physical location - fruit markets, the stock market, the futures market; others such as the money market and foreign exchange are a network of traders connected by telephones and computers."

However, I also came upon an interesting thread from someone who doesn't have English as their first language asking what a "market" was. One of the replies - also, I suspect, from someone who isn't a native English speaker says:

"market is mirror for sales person"

I think I prefer this second definition/explanation.

These days I am more or less apolitical, but I really don't think Gordon Brown should get any plaudits for his bank bale out plan until he personally apologises for his "regulation lite" approach, which got us all into this mess in the first place.

And if he is looking for New Deal type projects to boost employment he could do no worse than to start building fuel storage facilities that would allow us, like the French and Germans, to store at least 3 months supply rather than operating, as we do at present, on a "just in time" basis.

Oil is rock bottom just now, but OPEC are meeting to agree to cut supply yet again in the hope of hiking the price.

Much of this winter's fuel poverty could have been avoided had we had the scope to buy and store fuel as and when the price fell.

When will Governments learn that we want efficiency rather than gimmickry?

And we've just had a letter from the Northern Rock cutting our highly inflated mortgage interest rate by something like 0.05% as a "loyalty bonus" for staying with them. Truth be told we tried to move, but with just 3 years left on a tiny repayment mortgage no-one else was particularly interested in taking us on, unless we were prepared to fork out a massive arrangement fee.

As things now stand both our mortgage company and our bank are owned by the Government, and in the present climate that seems a whole lot safer than risking going anywhere else.

But if I was the Northern Rock I'd be looking at my customer base to identify people like us, regular payers whose mortgage term will naturally expire well before this whole sorry mess is sorted out, and I'd be giving us a bloody good service, on the basis that we are part of the solution rather than part of the problem.

Northern Rock is also charging those on Income Support 2% above the standard rate. (I know this because I know other cancer patients who are in this position right now.) Folk in this situation only get their mortgage interest paid by DWP, and DWP are prevented by Government regulations from paying anything more than the BofE standard rate.

So people are having their homes put at risk by two arms of Government, i.e. DWP and a nationalised bank, and each month now substantial arrears are accruing due to the difference between the NR inflated rate and the standard rate that the DWP is able to pay.

Much of these bale out arrangements were brokered late at night on the back of an envelope.

The Government now needs to get it's arse into gear and work out the fine detail.

And that doesn't include shared ownership deals with housing associations for people living with Stage 4 cancer. Most have life insurance that will pay off the debt when and if they die - so why give people like this and their families a whole lot more grief when they're already dealing with quite enough?

PS Another interesting fact is that the US stock market has imploded six times since the American Civil War. So none of this is new - indeed anyone with an eye on history could and should have predicted it. And what did Gordon Brown study at university you ask? History - but clearly not economic history. Nor could he have being paying attention when his Dad gave a sermon on this:

"Then Pharaoh said to Joseph: "Behold, in my dream I was standing on the banks of the Nile; and seven cows, fat and sleek, came out of the Nile and fed in the grass; and seven other cows came up after them, poor and very gaunt and thin. And the thin and gaunt cows ate up the first seven fat cows."

Joseph explained to Pharaoh that the seven fat cows represented seven years of plenty for the land, and the seven thin cows stood for the seven years of famine that would follow. Joseph counseled the Pharaoh to store food during the years of plenty that could help the people of Egypt avert the effects of the famine to follow."

Truly there is nothing new under sun.....

4 Comments:

Blogger BarbaraS said...

Hear, hear, A! Very well said and neatly analyzed; you have more of a grasp on things financial than some of the pundits you hear on the radio...

3:29 pm  
Blogger Lucy said...

Sharp stuff, well analysed.

(I like the new banner very much, BTW, especially the little round tummy over the fig leaf!)

11:30 am  
Blogger apprentice said...

Thanks girls. The Income Support thing just makes my blood boli. They will know exactly who these cases are as DWP will be paying them direct.

1:06 pm  
Blogger PI said...

Well put indeed. It's one of my hobby horses that the powers that be - god save us - should be made to study history - especially the last 100 years. One's seen it all over and over again
Other old fashioned ideas: never a lender of a borrower be, don't put more in stocks and shares than you can afford to lose, don't buy anything you can't afford and don't live on tick.
The way people use the credit card
culture unnerves me. And we were always taught that greed is a sin. Yes I am a bit of a dinosaur.

3:58 pm  

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