The real cost of the 'Credit Crunch'

September 26, 2008 4:14am CST
I live in the UK and just like the US there has been a media frenzy about the credit crunch. As I type this now America's congress are trying to build a rescue package. In the UK there are already serious problems that are taking effect right now. this is not related to the credit cruch but it gives you a general idea of the economic stranglehold. Gas prices have risen buy 33% this past two months Electricity has risen by 14% this past two months Personal insolvency(people declaring bankruptcy) has risen this year by 37% Now to the credit crunch.. Our prime minister has allowed £100 billion fund to bail out the banks at the same time scapping a £100 billion scheme to support the elderly with fuel costs. Already repossesion of homes has doubled, and it is estimated upto 450,000 families will lose their homes this year this is the real cost of the credit crunch and we're only 2weeks into it. my question is:- America what is going to happen to you guys if Britain is struggling already after implementing a bail out strategy?
2 people like this
2 responses
livewyre
@livewyre (2450)
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22 Oct 08
Most people are confused about the Credit Crunch and the coming recession, you have rightly pointed out that fuel prices are not related to the crunch, but the combined effect is adding to the crisis.... In my estimation, the cost of the recession will be companies that are not super-efficient closing and many many jobs being lost. The effect of the Credit crunch will be costly credit (maybe the decline of the 0% credit card for balance transfers??) tougher rules for mortgages which all in all is not a bad thing. The cost however, of the bail-out is almost inconceivably enormous - so much so I don't think anyone knows what the long-term implications of this level of national debt will be.. The repossession figures are a bit of a red-herring because these are caused by people failing to keep up their house payments whilst the housing market is plummeting - if the housing market was buoyant it would not be such an issue, they could always re-mortgage - which is probably what these 'victims' have been doing for the last 10 years and now they are in a mess.. This is more like the scenario that caused the credit crunch than a result of the credit crunch - too much easy credit is always going to have consequences: http://www.thecreditcruncher.com/2008/06/credit-cards-where-did-it-all-go-wrong.html
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livewyre
@livewyre (2450)
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22 Oct 08
True that the wealthy won't be the ones to suffer, the poor don't usually suffer to any great degree because they have not so much to lose and certainly won't be affected by problems on the stock exchange. It's always those in the middle who have worked hard to put a bit away that lose out. Makes you wonder if it's worth trying to save money and build up a pension fund - be better off spending the lot with complete abandon it seems...
jimbomuso
@jimbomuso (950)
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24 Oct 08
As the days go by, the real length and depth of the problem is just begining to show.. CDS(credit default swaps) the Isle of Man bank collapsed needing a couple of hundred million, China going into rescession(with the US hoping it will dump its 2trillion dollar reserve on the global economy to but its way out!). The simple explanation is this... Corporate Greed exercised with no thought to the consequences.
jimbomuso
@jimbomuso (950)
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22 Oct 08
hi livewyre! thanks for responding, My posts never seem to get many responses.. a lot of my opinion is nearly stream of consciouness stuff, I'm no great mathematician, just a good generalist.. there are other factors to the credit crunch thet are just begining to come into play such as Credit Default Swaps, aggresive mortgage reposession and a whole slew of problems. going back to the fuel poverty problem, I watched a good docu from CH4's Dispatches on how Britain has only six energy providers who have completely monopolised the market and keep prices artificially high, It made for very interesting viewing.In the UK there was supposed to be safegaurds like the FSA(financial services authority) who have done absolutely nothing( a lot of people who work in it are ex-ministers.. suprise, suprise). I know I've digressed a lot but it really gets me because the people who are saying "oh dear this is disatrous.. we need to do this" are completely immune to this crisis because of their wealth.
arnoldream
@arnoldream (1332)
• Philippines
26 Sep 08
good thing you post that out, actually these are the complicated problem this world is facing right now...and everything seems to touch down to what we call inevitable economic recession due to massive mistakes of present financial and economic policies with the contribution of political policies as well, that sum up or have accumulated in time together as a perfect mistakes that throw the world into this big trouble...and the arab man in turban(bin laden)is watching with a smile on his face for mission accomplished, turning these superpowers to grab a hold on their economy..
jimbomuso
@jimbomuso (950)
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26 Sep 08
Hi arnoldream ! I didn't think I was gonna get a response, I dont know about Osama but it is the reckless policies of UK and US banks that have allowed the situation to develop, I have a very very smart friend who pointed this potential collapse 6months ago. So if a casual observer can spot it months beforehand, Why didn't our governments?
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jimbomuso
@jimbomuso (950)
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30 Sep 08
Ohhh Welll, it seems I spoke too soon... the republicans have stalled the bailout, I kinda agree with them, I mean why give nearly 3 trillion dollars(there is no way the amount that's been banded about on tv is the real figure) to idiots that mis-managed the sytem anyway?
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jimbomuso
@jimbomuso (950)
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3 Oct 08
I made the predication that the republicans were gonna drag there feet.... I was a little off base because both parties are playing a game of brinkmanship to get this bill through with tons of 'tacked on' clauses . If the bailout doesn't go ahead soon, it will trigger another crash because of the intensity with which the media is reporting it. Basically if it doesn't go through, there is gonna be a deluge of money migrating to Europe(or other countries where savings are insured completely). At the moment in the uk nearly 100 billion pounds has moved out of the economy in the last 3 days.(Ireland is looking promising to a lot of potential savers)As I've said before the little guys lose.