Blog
6 degrees of separation just became 2!
16th October 2008
So with almost every government in the world guaranteeing our deposits it’s all going to be fine. Business as usual, a bit of a blip and by January everything will be back to normal?
But has the Government actually thought this through? What if a bank in the UK did go bust, how would the Government actually pay people the £50K. Would they immediately nationalise the operation, retain all the staff and then reduce all the accounts with more than £50K to this amount? Would they then prevent anyone from moving any money? OK I am being simplistic but we need to look at the reality. The Government's ego is 'writing checks their body can't cash'. Every penny they are using to support the banks is being borrowed some where else. The assets they are buying with our money is for assets the banks have valued. Isn't this how we got into this mess in the first place?
So even if this £50K arrangement did work what about the business accounts? How many businesses would go bankrupt immediately? In effect the government has no idea of the consequences of what they are doing. They are just hoping that this is going to sort its self out. This guarantee nonsense is just to try and calm the nerves of the general public and massage the egos of the politicians. Let’s not forget it was the Gordon Brown, Mr Prudent who presided over this mess for the last 10 years.
Not too far away in Iceland we do have one Nation that appears to be one step further down the path of absolute failure and that is Iceland. One of the banks that has actually gone into receivership is Kaupthing Singer and Friedlander and suddenly the real effects of this crisis I have felt. In this case just 2 degrees of separation brings this home to me. I know the chairman of an organisation who invested nearly £6m in this bank and today faces the loss of it all. It appears a number of county councils also invested in Icelandic banks! How did this happen well they were offering the best interest for depositors in the world. The internet allows you to easily search for the ‘best interest rates’ and bingo Icelandic banks suddenly saw £billions flooding into the country, which they used to take part in buying assets all around the world. I expect all the credit checks on the banks at the time were fantastic!
So for some people they very real effects are becoming apparent and I predict next week the current situation will begin to sink into the general public and the mood will change rapidly for the worst.
Back to blog | Previous Article | Next Article
Bookmark with: