The Credit Crunch...a global cookie with a bad taste Pt.1

2 or 3 years ago the "Crunch Cassandras" - Nouriel Roubini, Nassim Taleb and economic historian Niall Ferguson, had predicted that our financial system was headed for a huge liquidity crisis.

36 hours in September changed the world. When investment bank Lehman Brothers collapsed, the credit crunch became a global financial crisis.

What is Credit Crunch?
Credit crunch is a reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from the banks.
But for the lay man, it simply means the Banks have no cash to give anybody..as put up by the Guardian, british tabloid, "no new cash, unless we have boardroom pay cuts." Cash which existed in the system has been turned into toxic assets, known to my 6 year old friend as debt, an amount written in books but doesn't exist.

Root Cause?
There is an old saying in the banking business that: Lending is the easy part. It’s getting the money back that’s hard.
The root causes for the economic crisis were too much debt, a culture of short-term rewards for long-term risk-taking and fatally flawed mathematical risk models. And plain old greed. As stated by Sharan Burrow, head of the Australian Council of Trade Unions "The party is over for corporate greed."

The Big Mouths

The Big Mouths (economies) took the biggest bite

While American and European households were borrowing up to the hilt, emerging ones were tucking away their savings. While rich-country banks were piling into ever-riskier assets, Emerging-economies had their banks keeping their holdings of such assets small. While the developed countries used credit cards, developing countries preferred debit cards.
Kaupthing Bank hf, one of three failed Icelandic banks under government control, lent about 310 million pounds ($460 million) to U.K. customers to spend on sailing boats and planes. The “corporate book” of Kaupthing’s London unit totaled 824 million pounds and also lent about 16 million pounds on “football” deals.
Pls take a min to find out the worth of assets of all banks in Ghana.


But who will suffer
A toxic cloud has now moved from Wall Street to main street and will impact the jobs, wages and pensions of ordinary working people...to be continued...