Posted by: madkentdragon | September 26, 2011

Financial Crisis Can Someone Explain, Please?


The whole financial situation is beyond me, mainly because the telephone numbers that follow the pound, euro or dollar signs are completely unimaginable to me. I try to imagine the amount in fifty pound notes, but can’t get much beyond the million pound mark.

I explain this so that you can see where I’m coming from; I come from peasant stock, although I have a reasonable education, and I was always taught “if you can’t afford it – you can’t have it!” This may seem a bit hard to the seven year old eyeing a toy in Woolworths (RIP), but it also taught me that if I put tuppence in a jar that Dad put away for me that in six weeks I had that shilling needed to pay for it.

OK, Dad would relent about four weeks in and give me a “bonus” to make up the odd money, but it was because I had made the attempt at saving
it. Nothing in our home or shop was bought on credit, and when Mum produced a Great Universal Store Catalogue it was explained to me that if I wanted anything from it I had to make sure I could pay for it, better still why not save up for it and then buy it.

Mum was going to work and had her “own money” so she said and bought stuff from it, so I thought I would have a go – at this time I was getting one pound allowance – out of this I had to pay five shillings for dinner money about half a crown for bus fares and the rest was mine. I was
bought my school uniform, two winter outfits with one pair of shoes and two summer outfits with a pair of sandals; stockings and anything else I wanted had to be bought from the twelve shillings and sixpence that I had left – and that included school trips!

It seems hard but as Dad explained if you can learn to manage your money now, you will be set for life, he apparently hadn’t and when he first emigrated to Australia in the late nineteen twenties and had run out of wages before the end of the week he had to resort to trying to find any ripe
fruit available to eat and that wasn’t happening to his daughter.

Of course, I ordered too much off the catalogue and got into difficulties – I was fourteen, so dad paid it in full and deducted five shillings from my allowance until it was repaid in full; I learned my lesson.

You may wonder what this has to do with the current situation, well for a start mortgages given to those who could not afford the repayments – what were the banks/building societies thinking of? Mr Micawber comes to mind! We all know this as toxic debt which is sold on to other banks
and all lose out, but why was it done? Who was to blame – wiser minds than mine can answer that one.

But how have countries got into the mess that they have? I know some debts are caused by wars, countries needing money to buy weapons etc.
and pay for the increased number of troops and that the interest rate on that debt mounts up and can take centuries to repay – but can someone explain to me where the rest of the debt has come from?

I know the welfare state costs a lot and headlines scream out about “benefit scroungers”, but haven’t we all been paying tax and national insurance contributions to pay for this? We’re all living longer so we need to pay people longer – OK but why didn’t this get budgeted for?

My own pension, before you say anything is not fantastic, my company pension which started off as a final salary pension ended up as a whole
salary pension which cost me more over the years, but I’ve saved and can just about keep my head above water.

Unemployment – well that’s a story by itself – and I’m afraid the banks must stop holding on to the money that they are meant to be lending and help the small businesses, because the big businesses do not pay their bills on time and bridging loans on an otherwise financially stable
business would stop it laying off people to survive. Perhaps if small businesses thrived, they could all take on an extra employee – half the
unemployment situation solved in one go?

But banks are holding on to that money because they are worried about the institutions being divided, if this happens this “spare money” will be used to shore up any financial losses caused by the gambling side of the bank.

They will need to, judging by some of the catastrophes we read about, but at least the public’s accounts will be safe and shouldn’t need shed loads of government money paid in to shore them up. Hang on – where does a “broke” government get this money from – is it the same banks that they had to help? Please explain!

But please, for one moment imagine a world where most people are financially solvent and bankers who gamble are only found in casinos.

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Responses

  1. The reasons you can’t run a large modern economy like a household are simple.
    1. how many households do you know containing 60+million people
    how many households do you knowthat run an nhs, a transportnetwork,social services for thousands of people disabled through no fault of their own
    a civil service, forgein office,a prison system,a police forceand a justice(such as it is) system etc, etc.micro economics used to run a household simply do not work for£ multti-trilloin economies macro economics has to take into account so much more

    • OK households aren’t billion pound economies, however lack of budget whether for a hundred or a billion still has the same results – as does lack of oversight from the FSA on the banks

    • Hi Mike, a belated reply to your comment. Not sure of your background on which you base what you write, with which I have to disagree. Your argument sounds exactly like the pretext of a politician for economic and financial mismanagement. So much more I could say but probably enough for now.

  2. I agree reference the FSA, on a smaller level I can guarrantee that they could not even keep up with RBL Club FSA forms – it took them 3 years to realise a club was closed!


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