2018 Financial Crash...
The press covered the 10 year anniversary of the last crash in some detail this past weekend. It all started with the collapse of Wall Street bank Lehman Brothers, though many of us will remember vividly the scenes outside most Northern Rock branches as savers scrambled to get their money out. A previous blog confirmed that these "corrections" or crashes occur typically every 10 years. A leading economist Ann Pettifor who predicted the last crash 2 years before it happened, has been talking to a major news outlet about global debt and how it is now a frightening 3 times greater than global GDP. Debt this size is unlikely ever to be repaid so interest rate rises - the true cost of servicing this debt - is likely to be the trigger for the next crisis.
Globally, companies have made use of historically low borrowing rates are now finding the security or collateral provided is losing value. I referred to falling property values only last week.
The US Federal Reserve has ended its money printing programme [quantitative easing] and will raise interest rates - just like here in the UK.
Pettifor says that the tools used to deal with the last crisis will not be available this time as money is in shorter supply. BREXIT uncertainty is not helping the UK or the EU.
The Sunday Express [16 September] quoted some alarming statistics; bankers, as usual, got away with it but savers and tax payers, as usual, footed the bill. Despite the National Audit Offices boast that the Government had recovered all but 3.9% of the cost of the bailout [£1.2 trillion] savers have lost an unimaginable £100 billion in total interest payments. 10 years ago the average deposit account paid 3.1% pa [source: Bank of England] today it is a miserly 0.43%.
There is £164 billion sitting in deposit accounts paying no interest at all.
Taking inflation into account, the value of £10,000 held on deposit since 2008 is worth £8,790 today.
Those prepared to risk their money have fared better IF they invested after the crash. If they invested £10,000 the day before Lehman Brothers collapsed that sum, with re-invested dividends [FTSE 100] would be worth £21,352 today. How many of us would have actually taken this risk?
Borrowers have fared better but over extended and now face the real prospect of unaffordable mortgage payments should rates continue to rise post BREXIT.
However, earnings are actually 3% lower than they were in 2008 - 7% lower for those in their 30s. A leading personal finance expert says millennials are squeezed on every front. Soaring tuition fees, rising rental costs, a struggle to get on to the property ladder and incomes struggling to keep pace with inflation.
But why should we worry? The Government will do as all governments do when it hits the fan; force the tax payer to fund the bail out. Save the banks - naturally, and sit back and watch innocent people lose their jobs, homes, savings [if any] and personal dignity. Just like in 2008.
It is interesting that the birth of Blockchain and cryptocurrency came about immediately after the last financial crash; apparently those forward thinkers, fed up with being pawns in the Governments chess game, decided a "decentralised" system would provide us with an alternative to all of the above. A system free of the influence of the banks, the hedge funds, a system allowing us to store value securely, creating new possibilities for money.
It is also interesting that all those representing the "centralised" system - the decennial financial crash brigade - constantly berate us with stories of doubt about cryptocurrency, telling us that it is unsafe, that it lacks regulation and that it is an investment risk few can afford.
All 3 of these points are untrue - but the spin is having quite an affect this year.
The next financial crash may confound the economists by not taking place. I sincerely hope so. History shows us that Governments rarely plan ahead - whether it is in ignoring the massive military build up in Russia and China or the next financial crisis likely triggered by levels of unsustainable debt never seen before.
Is it not time to start building a bunker? Nothing can save us from military armageddon - but on the basis that this would result in no outright winner - the bunker I refer to is one which will help shield us from the worst the next crash will throw at us.
I am NOT talking about trading or mining Bitcoin.
On the 10th anniversary of the last financial crash, is it not time to at least find out more?