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the terror...the terror... - The Villages

Date: 2007-09-18 16:17
Subject: the terror...the terror...
Security: Public
Location:still at work
Mood:still tiredstill tired
Music:still tedious conversation
I'm not an economist, so a lot of the fine detail of the Northern Rock near-catastrophe has passed right over my head. But I watched it start.
I saw Robert Peston on News 24 breaking the news that the Northern Rock had borrowed funds from the Bank of England to tide itself over in the crisis. Now, Peston made the point - made over and over again, with a decreasing sense of credibility, in the following days by various people in authority - that if the Bank of England had at any time thought the Rock was going to go tits-up, it wouldn't have lent them the money. But the tone of the News 24 report was...shall we say, a little hysterical, underlining again and again how unusual this was and questioning whether the Rock was still a going concern.
A lot of people with money in the Northern Rock saw that article. And many others heard about it or saw other, even more hysterical, articles about it. And the next morning they were queueing outside Rock branches to take their money out. And the media were there to interview them and stoke the hysteria even further.
As I type this, things seem to be recovering. The Government guaranteed all deposits at Northern Rock and the Bank of England pumped another £4.4 billion into the financial markets and said it would provide short-term funding to other banks to stop the crisis getting completely out of control.
(Incidentally, where are the Bank of England when I'm having a financial crisis, eh?)
But for a little while it looked as though the people who rushed to take their money out could have crashed the Northern Rock. I don't suppose I can blame them, but for a while it looked as though the news stories had sparked a self-fulfilling prophecy by panicking people into withdrawing - as I write this - getting on for four billion quid from a bank that was already having financial problems.

As an aside, and this is just idle pondering, does any of this seem kind of familiar to anyone? In the early days of the Blair government we had foot and mouth, the 2000 petrol crisis - caused by panic buying - which only ended when the Treasury stepped in, and the 9/11 terrorist attacks.
The only thing we haven't had so far in the early days of the Brown government is a Royal killed in a car crash...
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User: (Anonymous)
Date: 2007-09-18 18:09 (UTC)
Subject: actually, it reminded me of something else...
While learning of the Northern Rock situation, I just kept flashing the Disney movie version of "Mary Poppins." (Yes, I know that the Brits are still trying to recover from what Dick Van Dyke thought was a cockney accent.) The run on the bank scene -- all but lost on me as a child -- danced vividly through my mind.

The level-headedness shown on by the Bank of England seemed reminiscent of bank run scene in "It's a Wonderful Life."

Hollywood and children's literature aside, I've actually been surprised that it didn't happen earlier. The subprime lending game was a disaster waiting to happen, brought on (in part) by the attitude of gross materialism in the free market gone wild.

Royal in car crash? Have you seen what Camilla looks like lately? (My apologies, that was low, cold, and uncalled for.)

-the usual
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User: hutch0
Date: 2007-09-18 20:48 (UTC)
Subject: Re: actually, it reminded me of something else...
I've never seen Mary Poppins. (How about that?) But I can guess what you mean. In The Standard tonight there was a photo of savers queueing outside the Golders Green branch of the Northern Rock today to get their money out. The first ones in the queue had been there since one o'clock in the morning. That's how panicked people have been.

I'd never heard of subprime lending until it started to melt down over there, and I hadn't realised it would affect us. Of course, you could look at the subprime thing as financial institutions enabling people with poor credit histories or not enough income to get on the housing ladder. Personally, I think it smacks of financial institutions preying on the weak. And now the whole sordid business has come back to bite them on the bum.
Still, the immediate crisis seems to be over; I'll be interested to see how it changes government policy.

Camilla was a bit of a looker when she was younger. Hand to god.
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User: (Anonymous)
Date: 2007-09-18 22:48 (UTC)
Subject: Re: actually, it reminded me of something else...
Well, since you've never seen Disney's "Mary Poppins" you have no idea of how parallel the panic is.

Subprime lending is all about the financial institutions betting on the market to continue only to go up. (That,and people believing that they have a RIGHT live with higher standards than their parents without considering how much their parents did without to do so.) It is the same collosal idiocy that created the tech stock bubble that invested in nothing, RISKY nothing, and then was surprised that they didn't deliver. Such naivite' is mind-blowing.

(I do remember Camilla in her more youthful days. My naughty joke was just a cheap shot for the sake of humor. I repeat: my apologies.)

the usual
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User: hutch0
Date: 2007-09-19 23:41 (UTC)
Subject: Re: actually, it reminded me of something else...
Well, slap me with a kipper for not having seen Mary Poppins. I've never seen The Sound Oh Music all the way through, either, and god only knows I've had some opportunities down the Christmases.

I can see how subprime lending is attractive to people who would otherwise not be able to afford their own homes. Everyone wants their own home, that bit of security, a place to call their own without having to deal with some asshole of a landlord (and I've been lucky with the landlords I had to deal with in my long years of renting)
The problem is the financial institutions viewing these people as a resource. Presumably it's played as a zero-sum game: we lend them the money and they pay us back, and if they can't, we get their property. We win. Which I guess is the basis of the mortgage market as a whole.

What I've found interesting, once more, is Gordon Brown's capacity to be elsewhere when the shit hits the fan. He was nowhere to be seen when the Northern Rock business blew up, leaving it to Alastair Darling to deal with the press. Then, when things cooled down and the markets started to pick up again, there was Gordon - not exactly claiming responsibility for sorting out the mess, but...you get the idea. What an intriguing Prime Minister he's shaping up to be...

I know you were only being mischievious about Camilla. And when I said she was `a bit of a looker' when she was younger, I meant relatively. Just in case people get the wrong idea...
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