Northern Rock – Nationalised . . .


Does that mean I’m a shareholder now?  Well I am a tax-payer.

I’ll be totally honest – I am clueless about all things financial. 

When they report on house prices, inflation and interest rates, my only capable concern is how it will affect my monthly mortgage repayments and whether our property has increased in value. 

When they mention the market economy, I picture our little market in town quaintly managing its financial affairs.

When they talk about adverse market conditions, I think to myself, I’d better avoid having a rummage around the market today and save it for a brighter day.

When people talk about banks and bankers and I see all that shouting and mad waving of arms at the London stock-exchange, I just think it would be far easier and a lot more civil  if they used ebay.

Likewise, this Northern Rock issue leaves me feeling confused and really quite gormless.

One thing I do know – it’s Margaret Thatcher’s fault.  And George Bush of course.

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14 responses to this post.

  1. I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.

    Mike Harmon

    Reply

  2. Patently the Government nationalised Northern Rock to protect the interests of its shareholders, most of them mere British citizens, but it was also giving a tonic to the Bank of England which has avoided through this measure to have to face the whole problem by itself.

    Although we should always bear in mind that the Bank of England, as happens with all countries’ central banks, depends fundamentally on the private banking system, therefore the Government has, by this move, also helped that system to get rid of a worrysome problem.

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  3. And I have just learnt that the nationalisation is just temporary. The Bank will return to the private sector as soon as its ills have been “healed”.

    So it is a question for the taxpayers to front eventually. National solidarity.

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  4. On reflection, perhaps the Government should contemplate national solidarity in the more important issue of the housing mortgages, don’t you think so?

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  5. Thanks Jose. I think we need an alternative to the temperamental and irrational capitalist economy that we have now. A greener, more radical way? I think so . . .

    http://www.greenparty.org.uk/speeches/66

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  6. The government is propping up a bank that has overleant and got into trouble with bad debt which it cannot finance. It is better for everyone that it doesn´t fail and so the government is probably right to apply this short-term fix – but longer-term, banks should be forced to insure themselves against this kind of thing so when it goes pear-shaped, the tax payer doesn´t have to bail out a company that´s already made profit off the backs off the same people now bailing them out.

    Spanish banks are in a far worse pickle, having overleant on inflated prices and invested heavily in poor projects, they are being bailed out secretly by the European Central Bank who can´t afford to let the Spanish banking system collapse – but it can´t go on, the bubble might not burst, but it must deflate.

    This does go back to the Thatcher relaxation of credit in the 80s and certainly can be blamed on Bush because it happened when he was President.

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  7. Good work Zeddie. Thatcher’s “I want it now” credit legacy.

    As for George Bush, well the buzzword is subprime lending.

    It all kind of makes sense now. A bit.

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  8. Glad to meet you again, Zhisou. Yes the giant mistake of momentarily making building promoters richer will be dearly paid by the banking system. A radical change of policy is now being observed, too late in my view.

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  9. Interesting to hear about the Spanish banking system being propped up. The Brits and Germans have been propping this up for second and third homes for years via cheap UK credit.

    Britain has been running it’s economy for the last 10 years on a false premis; borrowing against inflated housing prices and dealing in made up ‘city’ financial instruments such as derivatives that create nothing useful at all (except extreme wealth for the few that run them).

    Northern Rock deserved to collapse in spectacular fashion because it became one of Britain’s biggest banks by riding on the back of the madness of re-packaged finance more than any other bank. Effectively banks have not been taking responsibility for their lending because no sooner have they allowed a mortgage than they have been selling it on to other debt repackagers. This alowed banks to lend beyond their deposits. Loans and deposits were de-coupled. Pure madness. NR grew way beyond its means because of this system and the pure greed of its management. It was reckless beyond all imagination. Lesser men would be jailed for such crimes.

    Northern Rock should be closed and the mortgage loans sold off to other banks. £2billion of these loans already have been. I do not expect my tax money to prop up these reckless idiots.

    The UK economy is a farce as is the US economy. China’s economy is however very real and will take over the US as the largest economy within 10 years. And before people slag off China remember we ALL rely on their products! Oh and they are reported to be the 2nd largest investors in renewable energy (behind Germany). See The Coffee House.

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  10. Good points there Matty. Still not sure I understand it all but it seems to me that the rich always get richer at our expense. No matter what, they always manage to keep their wealth (and influence government policy to their advantage).

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  11. Jose, nice to see you too.

    Matt, the northern European impact on the Spanish market has been significant, but isn´t the major catalyst behind the false boom – the whole economy is based on construction and Spanish families spread out, with more divorces and more prosperity demanding more housing, the promoters have gone mad and overbuilt while banks have overleant.

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  12. The economists have always said that the building industry is about 18 mths behind the economic cycle, which is why when the economy down turns we end up with a lot of empty properties! And then negative equity rears its ugly head. 🙂

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  13. Negative equity is an usually only a number on a piece of paper, it only means something if you want to sell or refinance – otherwise it doesn´t matter a jot.

    If you don´t own a property – like me – but want to – like me – this whole bubble burst malarky is jolly good news. Viable purchasers – like me – will be like hen´s teeth soon. I am expecting a top hole deal when I eventually dip my toe in the choppy waters of property investment.

    The Spanish market is different than the UK – with much lower wages and a stagnant employment sector that makes icebergs look dynamic, there´s only so much that can happen with prices. You can´t go much beyond 40% of income for housing, and longer and longer mortgage terms only add more interest – there comes a point when you´re basically just renting from the bank.

    Spain´s election will change nothing – neither party has courage nor vision, they just want power to protect differing vested interests.

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  14. Interesting points Zhisou. It’s been getting increasingly impossible to get onto the property ladder here in the UK too but things are finally looking better for first-timers.

    Good luck with it Zeddie.

    Reply

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