What does it mean if the "debt bubble" bursts?
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To add to DiggerUK's reply, in 2007 the markets had been overvalued for ages, and people were borrowing at low interest rates. Some people were getting mortgages without a deposit. The markets were exuberant following a long bull market. Many people thought the markets were due for a correction, few saw the cause.
Banks and other institutions had been selling bad debt, by which I mean debts that were unlikely to be repaid, wrapping them up in complex financial instruments, and selling them on. This bad debt was spread throughout the Western economies, and no-one knew who owned what. When the extent of the bad debt became known, confidence in financial institutions was lost, the markets fell, and companies started failing. Why lend money to a bank, or use their services, if they might collapse the following day?
This is akin to the cartoon where the character runs over the edge of a cliff, but carries on going. Only when he looks down, and sees that there is nothing beneath his feet does he fall. Once confidence is lost, the markets fall.
We've seen this nonsense before, recently with the tech bubble, and even further back with the South Sea Bubble.0 -
BananaRepublic wrote: »We've seen this nonsense before, recently with the tech bubble, and even further back with the South Sea Bubble.
Today the FPC expressed concerns. Seems if lessons haven't been learnt.
Added to which there's concern over debt levels in China. As banks are state controlled debt written can be absorbed. The use of the money is the more pressing matter. With some commentators suggesting that growth could to fall to a crawl of just 2% in 5 years or so's time.
Even Saudi is looking to offload a 5% stake in Armaco to release funds. Interesting times lie ahead.0 -
Thrugelmir wrote: »Today the FPC expressed concerns. Seems if lessons haven't been learnt.
Added to which there's concern over debt levels in China. As banks are state controlled debt written can be absorbed. The use of the money is the more pressing matter. With some commentators suggesting that growth could to fall to a crawl of just 2% in 5 years or so's time.
Even Saudi is looking to offload a 5% stake in Armaco to release funds. Interesting times lie ahead.
Boom and bust - which Gordon Brown ended :rotfl: - is a feature of human psychology. We are due for another crash given the current bull market duration since the last crash, but whether it occurs this autumn as some predict, or a few years on is anyone's guess.0 -
here can an expat put their money. ?0
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marion_gibbins wrote: »here can an expat put their money. ?
Presume you meant 'Where'. Answer: gold0 -
99% of debt never gets paid back, it's the mugs who pay off their mortgages and debts, the truth is 99% of debt in the world will be defaulted onNothing has been fixed since 2008, it was just pushed into the future0
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All this is just another ruse to ripp off ordinary people who dont know about financial wheelings and dealings . You can be sure when the s### hits the fan that the bankers , politicians and money people will be fine and continue to line their pockets . It will be as usual the ordinary man that suffers .0
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Great - a detailed informative and factual post is written by a grown-up and made into a sticky on that basis, and then the thread promptly gets polluted by infantile sub-Daily Mail drivelling....0
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