Credit crisis - who's to blame?

I do get fed up with of Gordon Brown constantly blaming the credit crisis on global forces, without mentioning that he was a major contributor to those forces. To my mind, he was the prime cause of the British part of the crisis.

There have been many crises in the past from the South Sea Bubble to the 1929 crash and now the current situation. The fact is that every single one of them had exactly the same cause - a torrent of cheap money created by the government. In every case, the cheap money caused a massive bubble and when that broke, as they all do ultimately, - a crisis. The government is the only organisation that can create cheap money. And it does this by artificially holding interest rates down. True, the Fed in the US and governments in other countries were also doing this, but so too was Gordon Brown. Whilst he delegated part of this task to the Bank of England, whose actions were also irresponsible, Gordon Brown was in charge. He told the bank of England to control the creation of credit by monitoring the inflation rate, but he specifically told them to ignore the biggest symptom of all - the housing bubble.

Gordon Brown has also blamed the banks. And whilst there is no question that the banks behaved irresponsibly, they were secondary. Their job was to channel this torrent of cheap money; and as long as the cheap money continued to be created, they were obliged to direct it into riskier and riskier outlets, as all the safe outlets had been satisfied. They would never have acted that way if the cheap money had never been created in the first place. Gordon Brown also blamed the international effect of oil and raw material prices. But it was the cheap money from the west that caused these huge price rises. As soon as the cheap money started to disappear the oil price fell back.

So why did no one see it coming? I think the answer is that a lot of people saw it coming. I, and many of my friends, had been expecting this crash for a long time. Warren Buffet (the world's richest man and most successful investor) in his biography wrote about the coming crash and discussed it at several financial conventions. Many fund managers were aware of it, but admitted that they were making so much money that they thought there was time for one last fortune to be made before it all fell in. I think it was the case - not that Gordon Brown couldn't see it, but that he didn't want to.

At least Alan Greespan (prev Fed chairman) has apologised. I am still waiting for Gordon Brown to do so.

 

I think the rise in house prices is a huge contributory factor-I was watching it for years and years and I'm amazed that no one in authority didn't realise that what goes up, especially that much has to come down again. It was becoming unsustainable, to the point that first time buyers were unable to get a mortgage so eventually it would have crashed, without the credit crunch. If you price out the first rung of buyers, eventually it will have a knock on effect further up the ladder.

As for banks lending money at five, six or even seven times your annual salary or 125% mortgages - unbelieveable!!! I feel sorry for those who are now suffering, either through crippling mortgages repayments or are in danger of repossession but a bit of common sense when they were offered these extreme rates might have helped too.

 

For the best explanation that I've found anywhere, click onto this link

http://www.thislife.org/radio_episode.aspx?episode=355

It's a transcript of an American radio programme called "The Giant Pool of Money". It takes a while to read through but it's both entertaining and horribly fascinating.

However, I don't think it's any excuse for the rot to have spread to this country. For the last ten years, the Government has been happy to turn a blind eye to what the City of London has been up to. Apparently, the level of debt has doubled in the last 8 years.

And people have become obsessed with materialism, greedy for a lifestyle that depends on imported cheap food and goods. People want everything now.

 

Thanks Flinty - I will listen to that, when I have a bit of time.

 

In Britain, we have the Financial Services Authority, which is connected to and controlled directly by the central government. The FSA has the job of monitoring the activity of money lenders, insurers and all things financial. They made no attempt to curb the irresponsible lending of money to those that clearing couldn't afford to pay. They did nothing about house prices spiralling out of the reach of ordinary folk. They did nothing about banks lending and borrowing more than was sensible or without sufficient guarantees. As far as I'm concerned the financial state of Britain lies squarely on the shoulders of Gordon Brown and Tony B'Liar before him.

 

Someone sent me this link this week. Scary reading...especially the final phase.

http://www.marketoracle.co.uk/Article7675.html

 

I'm no politician and don't understand everything thats going on but in my opinion this big problem we are in seems to me to be down to greed.
To many people wanting and expecting to much and being prepared to give back nothing or
very little.
You can't keep taking it just can't work.

 

Greed-everyone`s greed caused the current climate. Greed of the part of the consumers who just have to have that new settee-the old one doesnt match the unnecessary but totally new carpet and curtains, greed on the part of the retailers in that they just have to open yet another unit on yet another retail estate selling yet more junk we don`t need, and greed on the part of the banks in that they just have to be the ones who collect the interest rates regardless of someones suitablility for such enormous credit limits-just so they van buy all this junk, and if that doesn`t work a profit from selling on bad debt to one another. And don`t forget the very lucrative business of attemoting to write off all this debt because the t`s weren`t crossed and i`s dotted correctly.


Zero accountability together with vulgar companies and vulgar consumers.

 

I have been saying for years that far too many companies are just sheer profit greedy, but offering rubbish service/goods in return. If ANY company can afford to cut prices by even 25% in a sale and still make a good profit from it, then just do it full-stop and stay in business for a lot longer.

Money is supposed to be short, people aren't spending, but a Gent's Hairdresser who has his own business in one of our cities, pays extortionate rent for his shop, works alone and yet CLOSED it for four weeks on Christmas Eve, flew to the Canaries for 2 weeks, came back home, stayed home less than 48 hours and flew off to Austria on a ski-ing holiday for 10 days, without opening up again, so WHERE is this supposed a Credit Crunch?
:cnfs:

In our driveway, we have an MOT failure and I removed and returned the tax disc. I had been told one *sc.rap-dealer would give me £150 for it, so phoned them. They wanted me to pay THEM to remove it and at £100 up front. Alternatively, I can take to them, but not get any cash for it. There are some Good spare parts on it, plus a cd/radio, alarm, etc., so worth a few quid if they sell them on and they wanted me to pay them. HUH!


*Had to put full-stop in and every time I previewed what I had written, I got asterisks that I Never put in, for some pathetic reason.

 

There are two issues, one the global crisis.

Two the crisis for our own country, Lets not forget the millions Britain has wasted under labor, The millennium Dome, The Iraq war, Id Cards, The forthcoming Olympics, The NHS charter, The housing of immigrants, Selling the country's Gold reserves at a loss, Creation of PCSOs, Numerous public inquires then all the problems caused by the European union. I could go on further!!!!!!!

Other countries are in a mess yet they will recover quickly, we will be doomed by Blair and Browns labor legacy for years to come.

To Bring us out of the crisis and turn the country around we need a few things:

A right wing government (conservative or UKIP)

To leave Europe.

A reform of the Immigration system so as to expel those not contributing to the country and ensure that any we let in will fulfill skill shortages shortfalls.

labor camps for those found illegally entering the country.

Drug tests for benefit claimants.

Chemical Castration for sex offenders.

Last but not least a severance of US foreign Policy Support.

 

A bit extreme there Paul!!

Yes, Labour have made a mess of the country, but I do think the Tories won't be any better; they'll just take money from somewhere else-robbing Peter to pay Paul.
I agree about leaving Europe-too much bureaucracy and supporting the poorer nations (although Britain might well qualify for some assistance soon!)
Yes, immigration needs controlling, but they do the work our own population seems strangely reluctant to do (I used to work in the hotel industry-in a department of 70 I was the only native English speaker)
As for labour camps, drug testing and castration-this sounds too like eugenics for my liking and very similar to Scientology and certain governments from the 1930's. Remember 50 years ago some people considered homosexuals to be perverts and needed similar treatment.

 

I agree with most of what as already been said.

The thing thats bugging me at the moment is after getting us into this mess, of everybody borrowing like crazy, the only government plan to get us out of it is, to get the banks lending again so we can all start borrowing more.

Not really well up on economics, but I cant see how this can be anything other than a very short term fix, storing up trouble for a few years down the line.

 

Hmmmmm-I agree Pete, how on earth do we get help from all of this. Isn`t the government borrowing money big time in order to meet this ludicrous payout.


Bailing out failed businesses is a direct breach of the Capitalist Ideology.

The fact that we are told if it doesn`t happen then it will get bad makes me fume-it`s already bad just in case Mr Brown hasn`t noticed.


We have three kids and I haven`t a clue how I am managing to so much as pay for their school dinners each week-nevermind the gas bill that is unbelievable!! It beggars belief that they have allowed a stay to be placed on the bank charges reclaim, money that has been stolen from every single one if us-and we are still expected to help them out of their self inflicted nightmare.


They should be lined up against the wall and........................

 

and what,.......... chemically castrated perhaps?:D

Oh that sounds painful.

 

Extreme perhaps but it would be effective.