Wednesday, October 31, 2007

Banking Panic - The Plan (3)

"Everyone should calm down and refrain from
making simplistic comments in a very complex area
which just causes unnecessary worry and concern."

Between 1990 and 1993, some 247,000 home owners lost their homes (falling house prices and rising unemployment attaining record levels). Central bankers throughout the world cut interest rates to bolster confidence and ensure that any institution in trouble could borrow their way out of trouble. After the recession of 1979-1981, everything reverted to 'normal'. But this shows how unstable and volatile normality actually is, especially when the prime-directive is to protect the system at all costs, but sacrifice the saver.

(i) Inflation increased so interest rates went up steeply, a traditional 'stemming-the-flow' move to stop borrowing. But as usual as everything costs more then borrowing will inevitably go up in order to make ends meet. A vicious cycle. And very cynical because rising expenditure is the result of 'mismanagement' that created high prices in the first place. Everybody pays for the 'mistake' with a justifiction that it's "not in our control". A euphamism for "out of control". It's still about redistribution. But change the creation to control (wealth and power) and this is different.

(ii) Recession followed with loss of employment and repossessions rising.

* What happens to a repossessed property due to repayment default? Presumably the lender (building society or bank) owns some of the property: the part that hasn't been paid for and if some repayments have been made, what proportion of a property can be repossessed?

Repossession

(iii) The UQ (aka UK) joined the ERM. To maintain sterling at a given exchange rate, the Conservative government kept interest rates at extremely high levels. Prime Minister John Major, indicated that the policy had 'killed" inflation. It certainly killed a lot of households, people losing jobs and not able to afford the huge increases in mortgage repayments. Individual Voluntary Arrangements (adjusting the bankruptcy laws) make it, on the face of it, much easier for defaulters to dodge their responsibilities. However, the question*, above at (ii), still stands about repossession of a partly paid-for home before default. The reason for this cannot be generosity, but a method of 'creating' money. Goverments do not do this out of kindness. Look deeper. Much deeper. The negative equity trap (or here) emerged from the snake-pit: result.

Disaster

House prices dropped as nobody could move. The banks and building societies would suffer. The government suffered and paved the way for change.

Protect the system at all costs,
but sacrifice the saver

Banking Panic - The Plan (2)

Black Wednesday: 16th September 1992

Black Friday - a cynical 'new term' being promoted (2011) that is supposed to indicate when an account in the red (debit) goes into black (credit)

In British politics and economics, Black Wednesday refers to the events of 16 September 1992 when the Conservative government was forced to withdraw the pound from the European Exchange Rate Mechanism (ERM) after they were unable to keep sterling above its agreed lower limit. The most high profile of the currency market investors, George Soros, made over US$1 billion profit by short selling sterling. In 1997 the UK Treasury estimated the cost of Black Wednesday at £3.4 billion

Financial Crisis Unfolded - The Global Conspiracy (2009)

The economy was "fundamentally sound" according to politicians, but from 29th October 1929 onwards: The Great Depression. Meanwhile, European economies were in trouble, and in Austria when Creditanstalt followed many of the German banks into liquidation (1931), the future seemed worse and Governments were falling and nations came off the Gold Standard.

Extract:

Where did the original wealth begin? That's an easy one:

Earth's resources

"Wealth doesn't grow. It declines. New sources of a known resource may be located or a different one altogether, but unless something is replaced it will all become exhausted."

Or redesign the original creation

Appropriation is a euphemism for theft: "...the invaders seized the land and property of the inhabitants..." "...the army seized the town..." Sounds like the invasion of Iraq. Little wonder the inhabitants are hostile. Nazism The Nazis triumphed in 1933, but America came off better. Hitler ( Rise -> 1932)

Extracted from Wikipedia:

In 1932, Hitler intended to run against the aging President Paul von Hindenburg in the scheduled presidential elections. Though Hitler had left Austria in 1913, he still had not acquired German citizenship and hence could not run for public office. In February, however, the state government of Brunswick, in which the Nazi Party participated, appointed Hitler to a minor administrative post and also gave him citizenship on February 25, 1932.^[35]

The new German citizen ran against Hindenburg, who was supported by a broad range of reactionary nationalist, monarchist, Catholic, republican and even social democratic parties, and against the Communist presidential candidate. His campaign was called "Hitler über Deutschland" (Hitler over Germany).^[36]

The name had a double meaning; besides an obvious reference to Hitler's dictatorial intentions, it also referred to the fact that Hitler was campaigning by aircraft.^[36] This was a brand new political tactic that allowed Hitler to speak in two cities in one day, which was practically unheard of at the time. Hitler came in second on both rounds, attaining more than 35% of the vote during the second one in April. Although he lost to Hindenburg, the election established Hitler as a realistic alternative in German politics.

Chancellor Hitler (30th January 1933)
Reichstag Fire (27th February 1933)
Hitler Becomes Dictator (5th March 1933): 6 days later
Enabling Act (23rd March 1933): 18 days later
George W Bush (43rd US President)
World Trade Centre (11th September 2001)
PATRIOT Act (26th October 2001): 45 days after the 'attack'
PATRIOT Act (see also) IMF
Keynesian Monetary Theory
Welfare State
Welfare State - for the wealthy
World Bank

The availability of cheap credit and deregulation of financial institutions resulted in the 'property boom'. This slowed and stopped because oil prices soared. Many gained a relatively healthy profit, but a smaller sector made a real killing. Soaring oil prices and the protection of the banking system. Where the real money is and it isn't the symbolic "folding stuff".

The real wealth is in control and influence

Tuesday, October 30, 2007

Controlled Demolition - 911

The very tidy destruction of the Twin Towers in New York (11th September 2001) clearly suggests a controlled demolition.

Thousands of dead through a war regarded as being illegally instigated and conducted on a false premise. World domination by control of oil. This constitutes an exceptionally serious war crime.

In the interest of balance, however, it has to be conceded that a speeding plane travelling horizontally does not have sufficient mass and momentum to 'push' over a building the size of the towering structure. Gravity would ensure a more or less vertical collapse of the huge weight of concrete and bricks. The momentum gained as the building crashed downwards would increase and an increasing amount of damage would be inevitable.

It is also accepted that the downward compression of the air-space in the building could cause what appears to be ejections somewhat like the powerful horizontal blasts of smoke/dust actually observed. The ejections do simply appear too much like explosive blasts rather than a squeezed volume of gas.

The speed with which the collapse occurred does not favour a natural event. Weakness is expected, but...

Banking Panic - The Plan (1)

Banking Panic - The Plan (Prelude)
Banking Panic - The Plan (2)
Banking Panic - The Plan (3)
Banking Panic - The Plan (4)
Banking Panic - The Plan (5)
Banking Panic - The Plan (6)
Banking Panic - The Plan (7)
Banking Panic - The Plan (8)
Banking Panic - The Plan (9)
Banking Panic - The Plan (10)
Banking Panic - The Plan (Nearly There)
Banking Panic - The Plan (Arrival)
Banking Panic - The Plan (The Next Phase)
Banking Panic - The Plan (11)
Banking Panic - The Plan (12)
Banking Panic - The Plan (13)
Banking Panic - The Plan (Exit)
Banking Panic - The Plan (1st Encore)
Banking Panic - The Plan (2nd Encore)
Banking Panic - The Plan (3rd Encore)
Banking Panic - The Circus

The Housing Markets

The UQ (aka UK) Ltd housing market is considered to be potentially in crisis. It's certainly in a state of delusion. Shares plummet as much as 10% in the housebuilder trade. Money lenders (building societies, banks, debt 'consolidating' agencies etc). Tracker mortgages and raising the cost of borrowing for the new (next generation) homebuyer. Debt rising exponentially: no problems. And everybody is happy according to a media effectively controlled by:

Rupert Murdoch

So the story goes. Reality or delusion?

UK house prices have apparently suffered their sharpest drop since January 2002 (2.6% as of August 2007) according to Rightmove. Incidentally, the argument that there is a housing shortage in the UK gets rather strained (unless this is qualified with 'affordable' = sensibly and realistically priced without greed attached) with appropriate advertising.

Most problems have been confined to the "sub-prime" end of the mortgage market and lenders are beginning to be a little more prudent when lending money to those with a poor credit rating or low incomes. Low income presumably meaning an income that is regarded as insufficient to realistically repay a loan without reducing the interest payable. This is a kind of "rock-and-hard place" scenario, but this time for the lender.

The Halifax and Abbey banks have raised the interest on their tracker loans and indicates the issue has reached the mainstream end (aka: lucrative middle range) of the mortgage market. So with the rejection of all but the best 'quality' mortgage customers, the future scenario is looking like a vast and very stagnant housing market of unsold homes: nobody (next generation) can afford to buy these very 'affordable' houses. There are plently of houses, but no affordable ones.

Modern-day homes (prefabs) are now being made to sound popular. But:

Who is popularising them?

The construction industry

Who is suffering or will suffer?

The next generation

and surprise, surprise it is here:

NOW

What could happen as the pit deepens and the trough deepens at a similar rate? This is not Keynesian Theory and the principle is even more straightforward. Wave goodbye to a wrecked system and wave a welcome to the next, and very new, generation. The corollary ("a proposition inferred immediately from a proved proposition with little or no additional proof") is that there will be a lot of negative equity around, but hide one crash behind a bigger one and nobody will notice? That is highly unlikely, but so what? Who cares?

Northern Rock allegedly supplies 23% of all UQ (aka UK) Ltd mortgages. One implication of this is that potentially 50% of new mortgage lending won't happen. To make up this loss someone will have to pay. Everybody else. Watch for the interest rate hikes.

Negative growth. What a quaint financial term. It means CRASH: prompted by the credit crunch and house prices are expected to cool and if all this affects (un)employment then...

...allegedly, the financial services industry is the biggest contributor to the UK economy. Examine that statement. This 'industry' contributes nothing, but only acts as an agent to increase debt and so monetary interest and so greater debt. The industry helps to create a self-sustaining situation that potentially ends with a lot of redistribution. It actually creates nothing and contributes nothing except misery disguised as assistance to create misery. If the credit crisis worsens (!) this could end up with companies making lay offs and increasing levels of unemployment. When the 'quality' end of the housing market struggles, the result could well be a housing crash.

This presupposes that those good quality customers will not meet with problems. Unemployment caused through this predictable scenario could be a reality and the knock-on effect would be dreadful though predictable. The irony here is that the very people who arranged loans for 'new business' end up as needing a loan themselves as a result of the situation they have helped to service. The major banks still freely lend to good quality mortgage customers, as much as five or six times a clients' annual salary, but denial states there is no problem and everyone is very positive about the future.

While tracker mortgage rates have been rising (for new customers: the target) fixed rate mortgages have fallen. Banks finance fixed deals usually in the swap markets: the Bank of England's base rate more heavily influences borrowing rates. As at 15th September 2007, this rate was 5.75%. Swap rates have fallen suggesting the movement of interest rates is expected to be downwards.

I can see a change of government (labels) very close as the mess continues to descend into absolute chaos. A new government will say: "it's not our fault" and "we told you so" and the old government will just be forgotten. The last +10 years of societal destruction will be just forgotten with the introduction of change.

Money markets recover, but evolve. The question is does the monster get more powerful? It is still a monster: "where the money is".

The irony? Greed lives on yet is hungry for more, but starving.

When the human race is gone (another mass extinction), the Earth will be a happier place and life can then get on with living.

The future is about not being human: Devil's Advocate.

Banking Panic - The Plan (Prelude)
Banking Panic - The Plan (2)
Banking Panic - The Plan (3)
Banking Panic - The Plan (4)
Banking Panic - The Plan (5)
Banking Panic - The Plan (6)
Banking Panic - The Plan (7)
Banking Panic - The Plan (8)
Banking Panic - The Plan (9)
Banking Panic - The Plan (10)
Banking Panic - The Plan (Nearly There)
Banking Panic - The Plan (Arrival)
Banking Panic - The Plan (The Next Phase)
Banking Panic - The Plan (11)
Banking Panic - The Plan (12)
Banking Panic - The Plan (13)
Banking Panic - The Plan (Exit)
Banking Panic - The Plan (1st Encore)
Banking Panic - The Plan (2nd Encore)
Banking Panic - The Plan (3rd Encore)
Banking Panic - The Circus

Saturday, October 27, 2007

Nuclear Power To All Except Iran

Iran is sitting on oil and has

no need for nuclear power

Such was the gist of a comment made by Francis Maude, MP on BBC's Question Time (25th October 2007). A mistake? The hypocrisy in any nuclear stance is nonetheless made very clear. The responsible nations can wield the big stick over other less-developed nations keeping their progress back. The underdog must have something sitting on it: the developed countries.
The 'benefits' of nuclear energy form a cloak over the 'responsible' production of weapons-grade plutonium. If the 'inspectors' were to 'invade' Britain and audit the nuclear capability, little would, no doubt, be discovered. Look to the cash for peerages circus. A highly predictable outcome: a non-event. And a waste of time and money. But that money went somewhere. It didn't just disappear. Fortunes have been made and nobody has come to account. And never will. Such a spectacle would probably be unconstitutional and could never be brought to the world stage.
Heard it all before?
Hypocrisy always smells rotten. Obviously, there is no sensible and credible argument to counter Iran's declared interests in developing a nuclear power base. The developed West knows exactly the potential of such moves and is obviously the reason for the united opposition. To even mention oil in the era of climate change debate is quite amazingly ludicrous. Predictably so. The climate issue was completely ignored. Whatever the view on climate change, right or wrong, the current political climate demands that political attention turns toward it. A meaningless Nobel Peace Award has been donated in the name of politics and in so doing rubbishing all and any worthy past, present, or future winner(s). Clearly, the political game is being lost by resorting to such deep and dark measures.
The answer was a desperate one as there can be no answer and if the left-hand or right-hand path is taken, they both lead to the same place: Hell. To the bystander, this goes unnoticed and appears to offer choices. No choice is on offer.

Madness Of Nuclear Power

Nuclear power is wanted by the West, but must be denied to any unfavoured (contemporary) regime. Nuclear power stations produce the materials for nuclear weapons. It's the only place such products can be made. At the same time, oil is alleged to be running out. The long-term case of pushing nuclear and sacrificing a Nobel Peace Award strongly suggests that the imminent failure of the oil fields is a lie. Scaremongering. The prize is $£trillions spent on creating nuclear power plants, making shedload after shedload of money and destabilising the World in pursuit of that money.
Iraq and Iran are not 'nuclear powers', but with a little of the right help from Russia, China and Pakistan could constitute a powderkeg with Israel right in the middle. Then, of course, climate change can be mentioned since this involves more $£trillions. Incredibly backward thinking. Like many politicians, it is money talking, but never thinking.
World domination firstly involves securing the military, controlling the money and so controlling the people.

Benefit Provider

Benefits are provided to keep people in poverty. There is no reason for the beneficiaries to do anything and they become totally dependent on the State (benefits). This in turn supports the government that 'provides' the benefits and virtually ensures future votes to get (back) into power. Effectively, this is simple bribery using, of course, taxpayers (public) money that was originally provided by taxpayers to the incumbent government (by force and threats of imprisonment). Extortion Buying votes with public money and who would bite off the hand that feeds? What does government do with such freely given, and unaccountable £billions that have been 'donated' by the non-dependent taxpayer? The system needs taxpayers to fund lifestyles. In reality, the government (ie a collective of individuals who soak up the power and control) is the dependent entity.

The parasite = government

feeding off the host:

the people

Strength is completely with the people, but is not fully realised. Some societies are forced to tolerate dictatorships and some ultimately rebel Libya, Syria. Tunisia. Egypt. Governments have a military force and feel completely justified to repel all boarders, though in reality it is used to subjugate its own people. The most obvious are Zimbabwe and China, though many other examples still survive and are constantly misdirected into history.

Could this happen in the UK? Possibly. Society is ripe for revolution. Squeezed and squeezed harder ("tax the rich until the pips squeak"). In the times of Denis (as an ex-pm: now a Lord) Healey [Labour] (gongs are inevitable - DA) . Sir John Major [Tory].

Buried in the past with the attempt to induce forgetfulness. Without power and control these people are nothing. Empty and completely ineffective at creating truly positive outcomes. What is the real reason for the egotistical need for power? Power only implies an arrogance and the desire to control. Why? Access to the £billions in government coffers. Taxpayers' contribution to the upkeep of topical (adjective: 1) society.

Perhaps Without verifiable accounts that can be examined by any taxpayer how could you possibly know if you were being robbed blind?

Anarchy In Democracy Or Democratic Anarchy

"Democracy is the theory that the common people know what they want, and deserve to get it good and hard".

H.L. Mencken

Isn't democracy a wonderful thing? Nearly everybody has been 'persuaded' that having a vote is the way forward for a developed society. This is actually rather perverse. To allow the Great Unwashed majority to be 'governed' (aka: controlled) by a very small minority and actually accept it is right to elect such a group with effectively a signed blank cheque. Those 'elected' are simply equals that are magically raised to special status for absolutely no reason. They are not some kind of special improved human who knows "better". It's rather quaint ideology that some rich individual or wealthy group [has disproportionate control of a majority holding, be it legally acquired or otherwise] is somehow "better".

Corporate Mantra
Manipulation
The French Way - corruption

If it wasn't a characteristic of (only) some members of society who will take control if they can, then anarchy would be a good thing. This is democracy in action and control is 'freely given' to the few. The prize is the seat of power. The source of motivation for drive.

Paradox oxymoron

There is a downside: it would mean being absolutely responsible for self, but without being selfish. Surprisingly, it's possible, just not the "successful" way. Paul Newman (1925-2008) has been quoted [The Observer 1982] as saying

"Show me a good loser and I'll show you a loser"

and is a stereotypical expression that assumes everyone must think with the same set of distorted "principles" of life or be held in contempt. It simply demonstrates a very shallow view that insists on being in control (Winners and Losers).

Devil's Advocate

A discussion point:

anarchy or bullying?

and constitutes a semantic debate.

Another debating point would be about gaining possession:

acquisition or appropriation?

Discuss.

05.01.2022

The hypocrisy is staggering: "It’s our democracy that is at stake."

“We will not yield,” Yaël Braun-Pivet, of the ruling La République en Marche (La REM) party, told parliament, referring to death threats which she said politicians of all stripes had received.

In a democracy free will allows a choice to be made between two or more options. In France, there is only one choice that promises continued 'freedom'. Unless this option is selected then isolation from society is legally enforced and any right of passage is denied.

Austria - mandated vaccination or else... hunted down. The 'hunters' need to be either vaccinated against

or fully recovered

from C***D. The hunters themselves do not need to be vaccinated but can still hunt down those that aren't.

This is facism. Totalinarianism. Dictatorship

Refusal to be innoculated with an unproven-safe cocktail, the contents of which are not declared (mRNA?), and for a reason that has also never been demonstrated to be true (Canada now blocking FOIs), is punishable by forced removal from society... or worse. If people 'freely' choose to be 'jabbed' with something purporting to be a life-saviour against an unseen assassin (literally - an electron microscope can not produce a clear image of any pathogen) then that is their 'choice' even though deceit is rampant. This is easily demonstrated.

Kary Mullis won the Nobel Prize (1993) for chemistry by inventing the

most significant technique (molecular cloning) of the 20th century.

The fraudulent 'test' was 'invented'

by Christian Drosten.

Even more as a totalitarian dictator, the French president Emmanuel Macron has promised (05.01.2022), using some very non-presidential language, ‘to make life miserable for people who refuse to get vaccinated against C***D-19’.

French leader draws fire with vow to make life "miserable" for C***D vaccine refusers

Saving humanity - H.L.Mencken

Saving humanity is a euphemism for ruling over humanity

In the case of the new mRNA ‘vaccine’ technology [a gene therapy (Pfizer website) that in theory either replaces a defective gene or adds a missing one - i.e. gene editing affects the genome inside a cell] it is an experimental product untested (until now) on humans. There is no data (information) that is either supportive or otherwise. The phase 3 clinical trial will not be completed until 2023.

Study start: 29.04.2020

Estimated primary completion: 29.10.2020

Estimated study completion: 06.04.2023

The manufacturers have been given 100% protection from prosecution (indemnity) regarding any adverse effect including death.

Tuesday, October 23, 2007

Banking Panic - The Plan (Prelude)

Rothschilds and the Federal Reserve Bank
Rothschilds: the dynasty
Criminal Rothschilds

And much more...

An Entrance to Heaven or Hell?

The Start of the Crisis

The first examples of banking panic (financial crises) happened a long time before the turn of the 20th century:

1720
John Law And The Mississipi Scheme, South Sea Bubble (see also Economic Bubble)

European and US investors and bankers were involved, so clearly global problems are nothing new. And, as always, based on greed.

1866
Overend & Guerney

The Bank of England became the "lender of last resort" for banks in trouble. Between 1814 and 1914 the United States lived through a total of 13 banking panics. The year of 1907 was the worst and came about through the Knickerbocker Trust Company. Greed took control over judgement, with speculation being the cause.

The earthquake in San Francisco put a huge strain on the banking and insurance businesses. Lloyd's of London had insured San Francisco. As a consequence, the Bank of England more or less doubled interest rates. The US moved into recession pushing down the stockmarket and finishing off the Knickerbocker Trust.

The queues of customers wanted their cash: $8m in 2hrs (Oct 1907). The bank is solvent people were told and the queue remained. Unmoved by these assurances.

"Stacks of green currency, bound into thousand dollar lots, were piled on the counters behind the tellers. One by one these stacks were broached and they dwindled rapidly. Clerks went to the vaults from time to time with arms full of notes, piled up like bundles of kindling wood".

Morgan, Grenfell & Co

Organised lines of credit and purchased shares in sound, though distressed, companies and engineered banking mergers to protect the system.

"A man I don't trust could not get money from me on all the bonds in Christendom".

The American public's distrust of financial or oligarchic corporations resulted in the anti-monopoly (trust busting) laws. The US also developed the Federal Reserve System in 1913. Before this, there was no central bank with "lender of last resort" status.

Federal Reserve - Bank of England
Dirty Secrets of the Temple
Northern Rock: 100 years onward

Wall Street Crash

24th October 1929, Black Thursday

"... there has been a little distress selling on the Stock Exchange...due to a technical condition of the market".

"... susceptible to betterment".

J.P. Morgan and Co

Rothschilds and the Federal Reserve Bank
Rothschilds: the dynasty
Criminal Rothschilds
And much more...

Blair and EU Presidency

Talk of Blair EU rôle played down.

So, there's the plan:

Blair as president of the

European council

A real horror story and nightmares are made of this.

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Fortunately, this was not a correct prophecy. That's really good fortune! But...

Not enough

(presumably)

for Blair

Tracker Mortgage

A tracker mortgage tracks the rise and fall of the Bank of England base rate in order to give borrowers the benefit of interest rate decreases at the soonest possible moment or...

A tracker mortgage tracks the rise and fall of the Bank of England base rate in order to give lenders the benefit of interest rate increases at the soonest possible moment and certainly before borrowers.

Monday, October 22, 2007

Northern Rock

The business
The savers
Update
On it goes - August 2008

Building society-turned-bank. Just 10 years after its floatation on the stock exchange, the bank is the fifth largest lender in Britain (total mortgage market = £334bn), relying less on local branches (saver funds) and more on the international money markets (borrowings) to raise funds to lend to its customers. Around 75% of funds would be raised by short term borrowing from these markets and only 25% from saver investment (70 branches and 1.5 million savers).

Norther Rock - Update (November 2007)
Adam Applegarth And Northern Rock (April 2008)
Northern Rock - Lending Policy (January 2009)
Northern Rock - The Depression (March 2009)
Northern Rock - Another Update (March 2009)

The end of easy and 'cheap' money. The Bank of England increased interest rates and raising a loan will probably become more difficult. Northern Rock has been providing around 20% of home loans and required emergency funding from the Bank of England, though according to the Financial Services Authority, Northern Rock has no solvency problems and the Bank of England insists that it is part of its job to supply liquidity to financial institutions that are having 'temporary' problems.

Liquidity problems...
but no solvency problems?

Rather a contradiction

This is money talking so don't expect logic or common sense and government getting involved, so expect some spinning to begin. The Chancellor of the Exchequer has approved a bail out. The British Bankers' Association patronisingly insisted there was no reason for alarm

"Everyone should calm down and refrain from making simplistic comments in a very complex area which just causes unnecessary worry and concern."

For the Bank of England to make such moves, it must believe that the crisis at Northern Rock could damage the financial system and the economy and illustrates the placement of priorities.

Protect the system at all costs...
but sacrifice the saver

The international banking system is complex and possibly quite fragile. Excessive credit has been globally available with banks virtually throwing money at borrowers without heeding the risks involved. Northern Rock's troubles started in the US sub-prime mortgage market (euphemistically: poor credit risk). Banks make the loans then sell them on to other financial institutions, which presumably (for whatever reason) did not fully understanding the risks involved. Some buyers were European banks.

No doubt everybody expected their cut in the profit

US house prices started to fall and borrowers defaulted. The price of the loans collapsed. Takeover rescues have already happened: a couple of regional German banks. Northern Rock did not have any of these 'loans', but the potential instability in the banking community caused by this collapse of the market led to banks keeping their money. This directly affected Northern Rock since to balance its books it has relied on borrowing from these banks that have now stopped lending.

To restart the money supply enter the Bank of England.

Interest rates have been very low (below the rate of inflation in some countries) and so it made sense to borrow 'cheap' money and invest in property, hedge-funds and private equity. So, prime property asset prices have rocketed and lending terms (mostly for property) have become somewhat lacking in rigor. Asset prices go up and borrowing is fuelled as a result with the banks very willing to lend against such a 'good risk'.

The six-times' salary for new mortgages had arrived. Borrow more to eventually buy more, but in the meantime owe more. Incomes have fallen behind outgoings. Spending less and saving more has started, but will such cutting back on buying result in recession? The financial markets are in panic mode and a run on any bank in a 'developed' country is a serious state of affairs and troubled times are ahead. Maybe saving will become more popular as credit becomes harder to obtain. Shares in Northern Rock and other leading banks on the London Stock Exchange fell as investors raced to sell up their holdings. Northern Rock holds deposits of £24bn from its 1.5 million savers and lends to 800,000 homeowners (mortgagees). It has expanded its mortgage lending aggressively in recent years by raising funds in the money markets and selling its mortgages as bonds to investors. However, the US sub-prime crisis caused investors to panic blowing a hole in the Northern Rock strategy by closing down the market for these bonds.

Adam Applegarth (Northern Rock chief executive) disclosed:

The emergency funding had not been used,
but warned that mortgage costs would rise

Until a few years ago, it was solid and respectable, but recent events have wiped out much of its stock market gains and its reputation has 'taken a hit'.

Pyramid Comment