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A little bit of help from NSC financial buffs.
- Thread starter Munkfish
- Start date
Dave the OAP
Well-known member
bbc money
That made me laugh hard. Because he really is trying to pre-empt the inevitable.
Specsavers? D&A?
American banks (and some UK ones) lent billions of dollars to people who had no realistic chance of repaying the loans. This was because they were being paid huge commissions to lend money. The banks then claimed that these loans were 'good' and sold them to other banks around the world.
When the borrowers started to default on their repayments, all the banks who now held these loans found they were worthless.
When savers heard that banks had worthless assets, they started to panic and take their savings away from the banks, making the situation worse. Investors also panicked, sold their shares in the banks, driving the price of the shares down, and so they started to go bust.
When the borrowers started to default on their repayments, all the banks who now held these loans found they were worthless.
When savers heard that banks had worthless assets, they started to panic and take their savings away from the banks, making the situation worse. Investors also panicked, sold their shares in the banks, driving the price of the shares down, and so they started to go bust.
Arthur
Well-known member
How does the price of oil and food come in to this? Or indeed does it?
Easy 10
Brain dead MUG SHEEP
Gully
Monkey in a seagull suit.
Oil is a dwindling resource, the demand for it is increasing as the two most populous countries on Earth (India and China) modernise and move from the third to second World. There is still a reasonable amount of oil left, however it is located in some of the most inhospitable parts of the globe, hence the costs of exploiting it and delivering it to the consumer reach astronomical levels.
The population of the World is increasing at a faster rate than our ability to grow and distribute food effectively, thus pushing the price up.
The price of all products comes down to supply and demand.
Taking oil, the demand has risen recently, as mentioned by Gully, due to expanding markets in China and Russia, as well as booming economies in the west (until the last six months). The supply of oil is constrained by the fact that (a) producers have formed a cartel to limit increasing output, (b) output has suffered due to instability in many of the producer countries (Iraq, Nigeria) and (c) it takes a long time (five years or so), before new oil reserves that have been discovered actually come on stream (due to the time it takes to build drilling platforms, pipelines etc.)
With food the situation is similar in terms of demand, the human population has increased, but in addition there has also been increased demand for biofuels, which means that farmers have a choice of producing wheat for humans or rape seed for cars. In terms of supply, this has been restricted due to drought in many of the major producer countries (Australia, Midwest USA), and cartels being created for items such as rice (major production areas Thailand and Cambodia).
So how do the two interact. I take it prices of food and bills go up but so do interest rates. I'm confused, can someone please explain?
Gazwag
5 millionth post poster
and if it wasnt for the internet and constant news reports few would have realised and so things would be better
An interest rate is the price of borrowed funds. The supply of funds have decreased because banks are now unsure if they have any cash to lend out. This is because the money they THOUGHT they were going to receive from Jim Bob and Mary Lou Schmuckelburger in Winconsin (who are both husband and wife, and brother and sister) is not materialising as they have disappeared up into the mountains to shoot bears.
Lord Bracknell
On fire
Why do lenders re-possess houses and throw mortgage defaulters out on the street?
Surely, with nobody buying houses, it would be better to take possession of the house and charge the defaulters rent to carry on living there? Everyone wins.
Surely, with nobody buying houses, it would be better to take possession of the house and charge the defaulters rent to carry on living there? Everyone wins.
If there is equity in the property then the bank makes money twice over from charging the borrower a penalty fee, and then recovering the capital owed from the proceeds of the property. With a bit of luck they also lend money to the new owner and continue to earn revenues from this source.
Halifax (was it?) did that some time ago, and became a very large property magnate - problem is - it does't want the hassle of repairs and maintenance. Mortgages pay better (most have mortgage insurance) and they don't have the maintenance issues.
beorhthelm
A. Virgo, Football Genius
- Jul 21, 2003
- 36,031
Oil prices have been put under pressure by every bad news story indicating a restriction of supply, so speculators pushed up prices and actual demand then has to buy at the artificially inflated market price, underpinning the speculation and pumping the ballon larger. fact is actual supply outstrips demand and while the difference has narrowed in the last few years, the price has increased at a far greater rate than the demand. Notice how Oil prices are now around $94 down from peak of ~$145, but real demand hasnt dropped by 35% in the last 3 months.
Food prices rose when those pushing for increased use of bio fuels for environmental reason found they got their wish as legisilation was passed in US and Europe mandating increase use of biofuels, due mainly as a knee-jerk reaction to the inflated oil price. of course the original idea was to use waste produce to turn into fuel, but suddenly the price of grain and therefore other foods by proxy could be linked to oil prices and speculators jumped on the new market. this caused a certain amount of understanable panic in some countries which protected national supplies by banning exports, which reduced the supply available on the open market and pushed the price further. The increase price of oil also mean increases in prices for fertiliser, machinery running and transportation costs.
you'd think so wouldnt you. if they dont want the hassle (and possibly cant leave the houses on the balance sheet without unbalancing it) they could setup a subsidary real estate company.
Shropshire Seagull
Well-known member
NMH
Banned
Now with shared equity mortgages, a house-buyer is invited to buy into a percentage ownership of a house, with the bank assuming the rest of ownership and charging a rent, as well as part-mortgage. When the inhabitant is able to get some time under their belt to show responsible payments, and hopefully be climbing the wage ladder in their profession, they can take over all, or more of the mortgage from the bank.
This scheme does seem to offer an inroad for a buyer to assume less risk, even if they are not necessarily paying any less money per month. They'll also not need to show the same payment-ability for a quality property, I wouldn't think.