Almost £4b more in cuts coming in the budget.

[I1L2T3]

I think that you've completely missed the point. It had nothing to do with anyone forcing an economy to grow. It had everything to do with the investment banks forcing their profits to grow.

 

Indeed. Basically the banks were able to create money in an uncontrolled way. This happened at mainstream banks, but more worryingly the shadow banking sector was creating money too, or at least creating instruments that were considered to be exchangeable for money.

 

The shadow banking sector is still up to its old tricks. Internationalised, global, uncontainable. Blunt truth is nobody has any clue how to regulate it.

[sutty27]

What fuelled the subprime crisis was that it was an extremely profit business to trade subprime mortgages, this led to a far greater demand from the financial institutions for more subprime mortgages to trade.

 

The mortgages given to the subprime market were so intentionally complicated that very often it was next to impossible for the layman to understand the terms of the mortgage that was on offer.

 

So the actual interest rate of the mortgage after the initial teaser rate, which usually lasted around 5 years ended, the payments sky rocketed making it impossible to pay back. All this was of course hidden way in the small print, in a language as I said that was often impossible for the layman to understand.

 

It was no coincidence that the credit crunch stated to happen about 5 years after the the financial industry found out the money that they could make from the sub prime market.

 

The big question is obviously why were mortgage companies offering mortgages that they knew that people wouldn't have a hope of paying back. The mortgage companies did it because they'd sell the mortgages on to other financial institutions for a tidy profit. So they didn't care who they swindled into taking out a mortgage, to the point they even offered mortgages without proof on an income.

 

It was this lack of moral hazard that was one of the underpinning elements of the credit crunch.

__________________

 

The big question is why didn't central banks and government stop it, answer, because they orchestrated it, they knew the only way to get economic growth was to encourage people to take out huge debts and create another asset bubble.

[JFKvsNixon]

The big question is why didn't central banks and government stop it, answer, because they orchestrated it, they knew the only way to get economic growth was to encourage people to take out huge debts and create another asset bubble.

 

They did not orchestrate it!

 

They did not step in because they really didn't understand the situation and they thought that the market would regulate itself, they also liked the revenues that industry generated. As I said earlier, there was a deregulation arms race between between the City and Wall Street's regulators in the battle for financial supremacy.

[sutty27]

They did not orchestrate it!

 

They did not step in because they really didn't understand the situation and they thought that the market would regulate itself, they also liked the revenues that industry generated. As I said earlier, there was a deregulation arms race between between the City and Wall Street's regulators in the battle for financial supremacy.

 

It wasn't difficult to understand, they needed something to take up the slack left by the dot-com bubble and property was the logical choice, but to create an other asset bubble they needed to deregulate the banks and pull housing costs out of the inflation figures, economic growth was their aim and the property bubble was their method of achieving it. Our government wasn't naive, they were complicit.

Edited March 19, 2016 by sutty27

[Anna B]

It wasn't difficult to understand, they needed something to take up the slack left by the dot-com bubble and property was the logical choice, but to create an other asset bubble they needed to deregulate the banks and pull housing costs out of the inflation figures, economic growth was their aim and the property bubble was their method of achieving it. Our government was naive, they were complicit.

 

Oh dear, what a lack of basic understanding.

 

It was nothing to do with governments, except that they deregulated the banks (in the 1980s) assuming they could be trusted.

They couldn't.

Certainly the banks were casting around for the next big thing, and that was credit. They couldn't give it away fast enough if you remember. The last untapped market for credit was the poor, who had not been considered creditworthy up to this point. The people who sold it to them pocketed huge bonuses knowing they would be long gone when it all went tits up.

[sutty27]

It was nothing to do with governments

 

Oh dear, what a lack of basic understanding.

[I1L2T3]

What fuelled the subprime crisis was that it was an extremely profitable business to trade subprime mortgages, this led to a far greater demand from the financial institutions for more subprime mortgages to trade.

 

The mortgages given to the subprime market were so intentionally complicated that very often it was next to impossible for the layman to understand the terms of the mortgage that was on offer.

 

So the actual interest rate of the mortgage after the initial teaser rate, which usually lasted around 5 years ended, the payments sky rocketed making it impossible to pay back. All this was of course hidden way in the small print, in a language as I said that was often impossible for the layman to understand.

 

It was no coincidence that the credit crunch stated to happen about 5 years after the the financial industry found out the money that they could make from the sub prime market.

 

The big question is obviously why were mortgage companies offering mortgages that they knew that people wouldn't have a hope of paying back. The mortgage companies did it because they'd sell the mortgages on to other financial institutions for a tidy profit. So they didn't care who they swindled into taking out a mortgage, to the point they even offered mortgages without proof on an income.

 

It was this lack of moral hazard that was one of the underpinning elements of the credit crunch.

__________________

 

A fundamental difference in the USA is that most states allow homeowners to simply walk away from their mortgage. The CMOs/CDOs driven off sub-prime loans quickly lose their income source when large numbers of sub-prime borrowers walk away. In the UK it is very different. Hand the keys back and the debt still follows you. It is less likely that financial instruments based on UK sub-prime loans could cause a systemic problem on the scale of what happened in the USA with the subsequent take down of a big chunk of the global financial sector.

[redfox]

France, and it's not my party.

 

I am impressed and touched your interested enough to respond.

 

Enjoy your break - I think we may be able to cope without you for short period mind - central office will be in touch no doubt when they work out how best to spin this one

[I1L2T3]

It wasn't difficult to understand, they needed something to take up the slack left by the dot-com bubble and property was the logical choice, but to create an other asset bubble they needed to deregulate the banks and pull housing costs out of the inflation figures, economic growth was their aim and the property bubble was their method of achieving it. Our government wasn't naive, they were complicit.

 

First point. We have seen exactly the same thing over the last 2-3 years in the UK. The Treasury turns a blind eye while banks pump up the housing market. The Treasury turns a blind eye while foreign money piles into property already overheated areas of the country. The Treasury quietly watches as non-EU immigration reaches high levels, knowing that it helps bump up revenues and growth.

 

So yes mistakes were made in the run up to 2008 but why oh why are you fixated with it. If you were genuinely worried about the things you are arguing about you should be more worried about what is happening now.

 

Problem is you are defending your Tories heroes by attacking another government for mistakes made nearly a decade ago, while failing to realise that the same mistakes are being made right now by your heroes.

[sutty27]

First point. We have seen exactly the same thing over the last 2-3 years in the UK. The Treasury turns a blind eye while banks pump up the housing market. The Treasury turns a blind eye while foreign money piles into property already overheated areas of the country. The Treasury quietly watches as non-EU immigration reaches high levels, knowing that it helps bump up revenues and growth.

 

So yes mistakes were made in the run up to 2008 but why oh why are you fixated with it.

 

I'm not, I'm just countering incorrect arguments that have been put forward.

 

 

 

 

If you were genuinely worried about the things you are arguing about you should be more worried about what is happening now.

 

I'm not worried it.

 

 

 

Problem is you are defending your Tories heroes by attacking another government for mistakes made nearly a decade ago, while failing to realise that the same mistakes are being made right now by your heroes.

 

I'm not defending the Tories at all, I'm just correcting inaccurate statements made by others.

 

They are not mistakes, their actions are just as calculated and deliberate as those made by the last government, and they will inevitably lead to another crash.