Credit Crunch Comments
I cannot find anywhere else to write this… (BBC site does not accept comments…)
Issue, banks are refusing to lend to one another, they are looking to the government to help (bail is to strong) them out. So plans are made.
But let’s go back to the previous ‘recession’ in the early ’90s, when things like negative equity and consumer spending became issues, the banks overall solution was to lend more money and ‘ease’ the effects of recession. This they did and so started the culture of borrowing. Once started they couldn’t stop.
Now 15 years later things have come to a head with another credit crunch and property 5 or 6 times wages it is unaffordable. Banks have worked their magic and ended up with huge losses. But putting these into perspective one can see that Banks are still making profits in dozens of other areas. Mortgages and debt are just one of their businesses. It helps them to publicise and concentrate on these losses while their underlying profits continue to unabated.
The government is set to help out, intervene, call it what you will, the point is the banks are asking the government to take on debt they don’t want. Now let’s be straight about this, the banks hold all the cards, if they economy falters, the government is to blame, if the banks crash the government is to blame, if jobs go, recession happens the government in the eyes of the population is to blame… the banks have the government over a barrel and their sole aim is to make money.
So what is the solution, the power of the banks has to be broken, a bit like the trade unions the banks are today’s powerhouses and have the capability to make and break governments and by association peoples lives (we don’t vote for banks). How do we do this?
Banks have to raise their money, they can go to stockholders, but actually the responsible action is actually to increase savings. If you encourage savings, that means more money in the bank and therefore by definition more money for that bank to lend out again. We have to go back to core basics in the banking system.
If I borrow on a credit card I pay between 13 and 20% APR’s regularly, deals exist but they are rarely without a catch and in today’s climate rarer still. If I put £100 into the bank I’ll be lucky if I see between 0% and 3%, even then I am taxed at source. This is a huge and in today’s computerised world acceptable discrepancy. Banks should in theory be reeling in the profits and to a large extent they still do.
However, a shake up of the saving system (I not talking about ISA’s here) but regular bank accounts would mean more money in the bank during times of difficulty and of course extra money available to people for that rainy day.
It is savings that have to sorted out and not debt. We sort our savings and the problems of debt will be solved.