8 posts tagged “credit crunch”

So here is how it works in practise guys,
the real deal.

This is what credit scoring, assessment and the bloody idiocy of computerised banking has led to today!

We got new credit card machines this week - 3 of them despite the fact we only asked for 2 but that is fine.

So all going well and then a call from our friendly bank manager. The very man who called the day before to make sure we received our machines.
It went like this:

"Do you do tour operations?
"duh, well yes, we are a tour operator"
So... uh,,,, we thought you sold beer.
We do.
But you sell other things
Yes
like what?
Like tours.

OK.

One hectic d ay later and £X000 banked into our account and the bank calls back

You banked £X000.
I know
What for?
Duh,.... sales.

Of what?
Tickets.
Oh......

Any travel.
No. F1 tickets to the Grand Prix.

Right then we are withdrawing your facility.
WHAT!
We are refunding the sale.
WHAT!!!

Why?

We didn't know you sold tickets?
We are a travel operator and we do events. Of course we sell tickets! What fucking difference does that make?

Lots. You have 2 choices. We can keep the funds for 180 days or pay them back to your clients.

180 days!!
What business can survive 6 months without getting paid?
If I am one fucking day late your guy in Mumbai is on the phone asking when I will be able to "bring my balance back in order" so now you want me to wait 6 fucking months for goods we have paid for and delivered?

Fucking great.

So, we sell goods and you stop us after they have been dispatched AND refund the customer...  is that the deal?

Yes

"Fuck you and your mother.
And I am not paying for the damn machines either."

"You have to send them back to the issuer."
Who is that then?
It is on your agreement.
Don't you know?
No
So you know exactly how much I owe, who my Mother is, the name of my dog and the address of all of my friends, relatives, aquaintances, the size of my dick and my sexual pecadillos but you don't know where to send your own machines to?

No.

What the fuck are you people on?

Talk about making life impossible.

I detest banks now. Totally, utterly and incontroveribly hate them.
DO NOT TRUST THEM!
Keep your wonga in cash and let them bleed to death.

The reason we are in recession is because of them.

They are the poison we all breathe and we need to do something about it!

Do you seriously think we will get out of this mess with them in charge.

Not a hope in hell my friends. It is up to us now and let them drown in their own spreadshits.

It has been a fuck fest since Silverstone Formula 1 guys.
The shows went really well and the crowd loved it all.
6000 folks in total but what a manic week that turned out to be.
Tons of folk but no one was spending enough which really hurts the bottom line.

I have been trying to figure out why that is and I have some juicy theories.

Since the race we have fought to pay all the bills and keep the new ideas coming in and thankfully we are 90% through it all now. Not easy but we are almost there.

Anyhow, this new business stuff has me thinking and learning lessons that I thought I knew from my past 20 years as a self employed maverick. But apparently the rules are totally changed.

It seems that it is no longer enough to make, create, sell and move on any more. Apparently we all need to have our anal sphincter muscles extended, manipulated and then forcibly re-engineered just so we can stay in exactly the same state we were in previously.

Here is how it works. It is a fantastically complex process called Banking.

What you do is this:

Give all your money to a faceless organisation with nice logo and very expensive shops
Then they keep your money forever.

That's it.

Sometime you get a small piece of plastic and a cheque book but mostly you just get a bill every month for their services!

They won't give your money back unless you are able to offer things you don't have in exchange for things you don't want like insurance that doesn't pay or credit cards that are refused every time you use them for "security checks".

These "security checks" make you look like a criminal and often lead to you being stuck in a que with a bag load of groceries and no way to get to fix it without wasting 3 hours and eighty thousand key strokes on your mobile to an automated operator who cuts you off before you have reached the "Press 21891721979 for security option."

The reason they need security checks is because a  10 year old kid with a Nintendo can break their systems and they are scared you may actually be spending some of their money somewhere else. Remember it is theirs now, not yours!
 
If they do give your money to anyone it goes to the worst possible, drug dealing, unemployed lazy shit for brains criminal to buy a crap house in a foreign country (ie America) at an extortionate rate of interest and when he doesn't pay them back they ask you for your money again so they don't have to feel poor or go out of business and the shyster in downtown Miami walks off into the sunset Scott free.

No keys, No fees.

In the rest of the world we have to pay our debts but apparently the USA is once again a special case. Hand in the keys and it is all over. No wonder every poverty stricken crack head in the third world wants to live there.

In times of crisis we have to do something and what we do reflects our standards and courage.

Incredible as it seems today I believe we saw Politicians doing something right.

The UK Government has agreed to take on some of the shareholdings of the major UK banks and has opened up the coffers so that short and medium term lending can operate again. In effect they have underwritten the entire UK banking system without exposing the taxpayers to the liabilities that the US authorities have begun to absorb.

The pain from this move will be long term and it will have a powerful effect on the way we all do business but, and it is a big but, BUT, they have managed to stabilise the majority of the financial system without driving the country into the ground.

By contrast, Iceland is in the mire with its entire credibility on the line and even the Saudi’s are struggling with a 10% fall in stocks overnight.

The contagion is spreading and if the rest of Europe follows the UK lead and stops messing around trying to prevent people taking their savings overseas we could well see the return of something approaching normalisation of the stock markets in the next couple of months.

The trick is to see it through. This is when we need to be tough.

We can’t let the market makers carry on having wobbly fits every time they have to face the results of their actions.

It seems to me that the people with the access to making the stock markets move, and thus who control the capitalisation / solvency of the banks are the very people we should be controlling. Their greed drove the valuations through the roof and their fear is causing the collapse – at least here in Europe.

We have been treated to lots of new catch phrases – credit crunch, toxic debt and all the others but the facts are still the same. It is an American cold that has infected the global systems and it may require a vaccination from a foreign body to cure it.

I have argued before that American capitalism. “red in tooth and claw” isn’t always as good as the press it gets.
Lets see if it works this time or if another model has the answers.

My money – literally and figuratively is on the UK plan.
Oh and well done the Aussie Reserve. 1% off!

Good move there boys.

Finally. To give you a taste of the pain before it affects you

These are the companies that have gone into administration in the UK in the past few days.

Wholesale of Clothing and Footwear.    Home Counties & Outer London    £91,000    08/10/2008
Development & Sell Real Estate.    West Midlands    -    08/10/2008
Manufacture of Other Food Products.    North East    £13,443,000    08/10/2008
Other business services.    North West    -    08/10/2008
Restaurant.    Central London    £478,000    08/10/2008
Retail Food.    Central London    £661,000    08/10/2008
Fashion Retailer.    Central London    £5,659,000    08/10/2008
Sale of motor vehicle parts.        -    08/10/2008
Real Estate.    Home Counties & Outer London    £3,572,000    08/10/2008
Photography and Film.    Central Southern    £322,000    08/10/2008
Manufacture of lifting & handling equipment.    Central Southern    £217,000    08/10/2008
Travel Agency.        £6,000    07/10/2008
Restaurant.    Central London    £446,000    07/10/2008
Engineering    South East    £3,000    07/10/2008
Day Nursery for Young Children.    Central Southern    -    07/10/2008
Provisions of consultancy and technology for the renewable energy sector.    North East    £409,000    07/10/2008
Other Business Activities.    North West    -    07/10/2008
Demolition, Earth Moving and Equipment Hire.    North East    £1,086,000    07/10/2008
Other service activities.    West Midlands    £109,000    07/10/2008
    East Anglia    £58,000    07/10/2008
Courier Services - National.    East Midlands    £72,000    07/10/2008
Trucks    West Midlands    -    07/10/2008
Automotive and Engineering Services.    South East    £380,000    07/10/2008
Outdoor Pursuits.    South East    £62,000    07/10/2008
Scaffolding Erection.    Central Southern    £49,000    07/10/2008
Specialised Retail Stores.    Central London    £367,000    06/10/2008
Restaurant, Bar, Hotel.    North East    £7,185,000    06/10/2008
Manufacture of Other Fabricated Metal Products.    North West    £197,000    06/10/2008
Design and Manufacture of Bespoke Kitchens, Bedrooms and Studies    Central Southern    £49,000    06/10/2008
Build and repair pleasure & sport boats.    Central Southern    £19,000    06/10/2008
Manufacturers & Suppliers of Packaging Products.    West Midlands    £104,000    06/10/2008
Research and Development of Science Products.    Central London    £44,000    06/10/2008
Research and Development of Science Products.    Central London    £22,000    06/10/2008
Manufacturers of other ceramic products.    South West    £1,228,000    06/10/2008
Retail of automotive parts.    West Midlands    £1,303,000    06/10/2008
Retail furniture and household.    North West    £319,000    06/10/2008
Travel Brokers.        -    06/10/2008
Painting and glazing.    West Midlands    £157,000    06/10/2008
Retail Sale of Clothing.    Central London    £3,834,000    06/10/2008
Textile Manufacturer.    East Midlands    £84,000    03/10/2008
General Mechanical Engineering.    North West    £356,000    03/10/2008
Other sporting activities.    West Midlands    £84,000    03/10/2008
General Construction and Property Development.    North East    £66,000    03/10/2008
Textile Manufacturer.    East Midlands    £114,000    03/10/2008
Rest Home for the elderly.    South East    £103,000    03/10/2008
Chilled food distribution.        £1,000    03/10/2008
Installation of electrical wiring and fittings.    Central Southern    £289,000    03/10/2008
Architectural Ironmonger.    West Midlands    £389,000    03/10/2008
Construction of Civil Engineering Construction.    North East    £1,038,000    03/10/2008
Renting and Sale of Motor Vehicles.    North West    £10,916,000    03/10/2008
Tarmacadam and Asphalt Specialists.    North West    £1,112,000    03/10/2008
General Mechanical Engineering.    South East    £39,000    03/10/2008
Unexploded Ordinance Services.    East Anglia    £109,000    03/10/2008
Investigation and Security.    North West    £9,000    03/10/2008
Blind Manufacturers.    Central Southern    £65,000    03/10/2008
General construction & civil engineering.    South West    -    03/10/2008
Plant and Machinery Hire.    East Midlands    £3,812,000    03/10/2008
Childrens Play Centre.    North West    £75,000    03/10/2008
Automotive and Engineering Services.    South East    £380,000    03/10/2008
Car Sales.    North East    £23,000    03/10/2008
Civil Engineering.    Central Southern    £1,171,000    02/10/2008
Windows & Conservatories.    East Anglia    £735,000    02/10/2008
Manufacture of Hot Boxes and Welfare site stations.    North West    £108,000    02/10/2008
Telecommunications.    North East    £832,000    02/10/2008
Real Estate Agencies.    East Anglia    -    02/10/2008
Other Business Activites.    Central London    £694,000    02/10/2008
Wholesale alcoholic & other drinks.    Central London    £694,000    02/10/2008
Develop & Sell Real Estate.    Central London    £32,000    02/10/2008
Distribution of golf equipment and apparel.    Home Counties & Outer London    £48,000    02/10/2008
Travel Agents.    Central London    £74,000    02/10/2008
Other Supporting Water Transport.        £42,000    02/10/2008
Retail sales of textiles.    North East    £16,312,000    02/10/2008
Electrical Engineering Contractors.    North East    £193,000    02/10/2008
Furniture Wholesaler.    East Anglia    £2,135,000    02/10/2008
Printing.        -    01/10/2008
Labour Recruitment.        -    01/10/2008
Grinding.        -    01/10/2008
Manufacture of tools.        -    01/10/2008
Bathroom Retail.        -    01/10/2008
Freight Transport by Road.        -    01/10/2008
General Mechanical Engineering.        -    01/10/2008
Property brokerage.        -    01/10/2008
Agents in food, drink & tobacco.        -    01/10/2008
Hair Salon.        -    01/10/2008
Kitchen Fitters.        -    01/10/2008
Wholesale Computer and Equipment Software.        -    01/10/2008
Restaurant and Bar.        -    01/10/2008
Retail Hardware, Paints and Glass.        -    01/10/2008

I know the House have made total idiots of themselves and taken leave of what little senses they had but you need to get things in perspective.

I don't often do this but here is a link that will help.

http://www.worldmapper.org/display.php?selected=169

There is so much to absorb here but for certain it will make you realise that maybe, for now at least.  you are quite lucky after all.

Bride_of_frankenstein

I have been on the journey of a lifetime recently.

It finally happened and I have finally got married.

To hell with all the doom and gloom around at the moment. I know it matters and I will no doubt bore you all stupid with my musing on the fall from grace of many merchant bankers soon. But for now I am basking in the luxurious glow of legitimacy.

It seems like I am not the only one to make some vows ( I know!! So did Mrs B. Duh...  )
But what I am really talking about is that my wedding was one of 4 I am attending this year.

No1 was at Alnwick Castle - Hell fire that was a do! The same place they made Harry Potter
No2 was mine own
No3 was last Saturday on a barge on the Thames
No4 is in the lovely Ribble Valley next month

This weekend is stag do no 3 this year.

Oh my poor sad liver!

So if you want an active social life I suggest you make friends with blokes aged from 32 - 40. They are all at it!!!

Free nosh and wine every weekend.

That's how you beat the credit crunch.

The current market jitters are centred on disturbances in the world's credit markets. Worries about the viability of sub-prime mortgage lending have spread around the financial system, and the central banks have been forced to pump in billions of dollars to oil the wheels of lending.

But what happened in previous financial crises, and what are the lessons for today?

There have been a growing number of financial crises in the world, according to the International Monetary Fund (IMF).

Among the key lessons of previous major financial crises are:

• Globalisation has increased the frequency and spread of financial crises, but not necessarily their severity
• Early intervention by central banks is more effective in limiting their spread than later moves
• It is difficult to tell at the time whether a financial crisis will have broader economic consequences
• Regulators often cannot keep up with the pace of financial innovation that may trigger a crisis.

During the late 1990s, stock markets became beguiled by the rise of internet companies such as Amazon and AOL, which seemed to be ushering in a new era for the economy.

When AOL's Steve Case took over Time Warner, the dot.com boom peaked

Their shares soared when they listed on the Nasdaq stock market, despite that fact that few of the firms actually made a profit.

The boom peaked when internet service provider AOL bought traditional media company Time Warner for nearly $200bn in January 2000.

But in March 2000, the bubble burst, and the technology-weighted Nasdaq index fell by 78% by October 2002.

The crash had wider repercussions, with business investment falling and the US economy slowing in the following year, a process exacerbated by the 9/11 attacks, which led to the temporary closure of the financial markets.

But the Federal Reserve, the US central bank, cut interest rates throughout 2001, gradually lowering rates from 6.25% to 1% to stimulate economic growth.

The collapse of hedge fund Long-Term Capital Market (LTCM) occurred during the final stage of the world financial crisis that began in Asia in 1997 and spread to Russia and Brazil in 1998.

LTCM was a hedge fund set up by Nobel Prize winners Myron Scholes and Robert Merton to trade bonds. The professors believed that in the long run, the interest rates on different government bonds would converge, and the hedge fund traded on the small differences in the rates.

John Meriwether, a Wall Street trader, headed LTCM

LTCM, which had borrowed a lot of money from other companies, stood to lose billions of dollars - and in order to liquidate its positions it would have to sell Treasury bonds, plunging the US credit markets into turmoil and forcing up interest rates.

So the Fed decided that a rescue was needed. It called together the leading US banks, many of whom had invested in LTCM, and persuaded them to put in $3.65bn to save the firm from imminent collapse.

The Fed itself made an emergency rate cut in October 1998 and markets soon returned to stability. LTCM itself was liquidated in 2000.

US stock markets suffered their largest peacetime one-day fall yet on 19 October 1987, when the Dow Jones Industrial Average index of shares in leading US companies dropped 22% and European and Japanese markets followed suit.

Program trading on the New York stock market worsened the crisis

There were also worries about the value of the US dollar, which had been declining on international markets.

These fears grew when Germany raised a key interest rate, boosting the value of its currency.

Newly-introduced computerised trading systems exacerbated the stock market declines, as sell orders were executed automatically.

Concerns that major banks might go bust led the Fed and other major central banks to lower interest rates sharply.

"Circuit-breakers" were also introduced to limit program trading and allow the authorities to suspend all trades for short periods.

The crash seemed to have little direct economic effect and stock markets soon recovered. But the lower interest rates, especially in the UK, may have contributed to the housing market bubble of 1988-89 and to the pressures on the pound sterling which led to the devaluation of 1992.

The crash also showed that global stock markets were now closely linked, and changes in economic policy in one country could affect markets around the world. Laws on insider trading were also tightened up in the US and UK.

US Savings and Loans institutions were local banks which made home loans and took deposits from retail investors, similar to building societies in the UK.

Under financial deregulation in the 1980s, they were allowed to engage in more complex, and often unwise, financial transactions, competing with the big commercial banks.

By 1985, many of these institutions were all but bankrupt, and a run began on S&L institutions in Ohio and Maryland.

The US government insured many of the individual deposits in the S&Ls, and therefore had a big financial liability when they collapsed.

It set up the Resolution Trust Company to take over and sell any S&L assets that it could, including repossessed homes, taking over the bankrupt institutions.

The cost of the bail-out eventually totalled about $150bn.

However, the crisis probably strengthened the bigger banks by weeding out their weaker rivals, and laid the groundwork for the wave of mergers and consolidations in the retail banking sector in the 1990s.

The Wall Street crash of 1929, "Black Thursday," was an event that sent the US and indeed the global economy into a tailspin, contributing to the Great Depression of the 1930s.

Franklin Roosevelt became US President after the crash

Despite efforts by the stock market authorities to stabilise the market, stocks fell by another 11% the following Tuesday, 29 October.

By the time the market had reached bottom in 1932, 90% had been wiped off the value of shares. It took 25 years before the Dow Jones industrial average recovered to its 1929 level.

The effect on the real economy was severe, as widespread share ownership meant that the losses were felt by many middle-class consumers.

They cut their purchases of big consumer goods such as cars and homes, while businesses postponed investment and closed factories.

By 1932, the US economy had declined by half, and one-third of the workforce was unemployed.

The whole US financial system also went into meltdown, with a shutdown of the entire banking system in March 1933 by the time the new President, Franklin Roosevelt took office and launched the New Deal.

Many economists on both left and right have criticised the response of the authorities as inadequate.

The US central bank actually raised interest rates to protect the value of the dollar and preserve the gold standard, while the US government raised tariffs and ran a budget surplus.

New Deal measures alleviated some of the worst problems of the Depression, but the US economy did not fully recover until World War II, when massive military spending eliminated unemployment and boosted growth.

The New Deal also introduced extensive regulation of financial markets and the banking system through the creation of the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC), and the separation of commercial and retail banking through the Glass-Steagall Act.

The failure of a key London bank in 1866 led to a key change in the role of central banks in managing financial crises.

The Bank of England was at the centre of the world financial system

Overend and Gurney was a discount bank which provided money for commercial and retail banks in London, the world's financial centre. When it declared bankruptcy in May 1866, many smaller banks were unable to get funds and went under, even though they were otherwise solvent.

As a result, reformers like Walter Bagehot advocated a new role for the Bank of England as the "lender of last resort" to provide liquidity (cash) to the financial system during crises, in order to prevent a failure of one bank spilling over and affect all the others ("systemic failure").

The new doctrine was implemented in the Barings Crisis in 1890, when losses by a leading UK bank, Barings, made on its investments in Argentina, were covered by the Bank of England to prevent a systemic collapse of UK banking.

Secret negotiations by the Bank and London financiers led to the creation of an £18m rescue fund in November 1890, before the extent of Barings' losses became publicly known.

10750

I was going to get back into blogging this week by posting a long and considered analysis of the continued sub-prime farago and the credit crunch but I guess you might not be in the mood for it right now. Instead I thought I would ask you a few questions about some other stuff that may be even more interesting and pertinent.

I have spent the past few weeks alternating between despair and excitement as I watched the meltdown in the world financial markets. Believe it or not it has a direct impact on what we do and on everything we work for. Somehow it seems bizarre that the mistakes of a few (and they are a few) greedy bastards on Wall St can have such a profound impact on the lives of people across the globe but then that is what globalisation is all about. ... The Butterfly effect in action.

At the same time we need to remember that there are some things in life that are not reliant on the actions of others - no matter how powerful. We are all masters of our own destiny to a greater or lesser degree and it is no good blaming Bear Sterns for our own penury and idiocy.

I thought I would let you in on an email from my best friend. A dear, deluded and somewhat deranged nutter who spends his time in East Asia working on aid programmes for various governments.

Here is what he sent me this morning and my reply. Enjoy:

"Got pissed last nite and let my tranny hairdresser give me a number 1 !! (to help lose weight ha ha). Lip up fatty, this is the skinhead i wanted when I was 13 but was too scared. Only thing is I now need to wear a hat as am liable for sunstroke.
 
The continuing life and crimes of pw......."
 
My reply

hahahahahaha

I know the feeling
I went to a barbers in London once - italian geezer - no english
He asked me what I wanted I said No3 at the back and he proceeded to carve a swathe right through my lovely locks from back to front. I looked like an ethnic peach! So I shaved the rest off and went back to Tara looking like an extra from Trainspotting. To make matters worse I had a spot on my forehead the size of a belisha beacon.

It grows back.

Make the most of being scary. You get better seats on the bus