Why are banks failing? What has happened?

sadabbott

Ok so some people bought houses and paid too much. That happened before.

Why are the banks in trouble? What has happened?

What is going to happen?

Is this going to end in the destruction of capitalism and a resurgence of communism?

SeanW

sadabbott wrote: »

Is this going to end in the destruction of capitalism and a resurgence of communism?

Unable to borrow money to fund the liabilities to others...

Socialism has to come before communism.

GeorgeHowell

I doubt it, but it does show that unfettered and poorly regulated capitalism does not work in oligopoly/cartel type situations.

Under communism, however, nothing can fail -- except the whole economy in terms of delivering decent standards of living for the mass of the population.

sadabbott

lets go for communism. i like the safety it provides.

Lokolo

sadabbott wrote: »

lets go for communism. i like the safety it provides.

Go on Holiday to N Korea first

PasturesNew

sadabbott wrote: »

Ok so some people bought houses and paid too much. That happened before.

Why are the banks in trouble? What has happened?

Those people then stopped paying back the loan.
Maybe they split up and got 4rsey and left the other one to pay it - and they couldn't/wouldn't.
Maybe they lost their job.
Maybe the missues got up the duff the minute they got the house.
Maybe they borrowed even more to fund a lifestyle they couldn't afford.
Maybe they fixed their mortgage for 2-3 years and had 100% mortgage interest only and when it came to remortgaging the price doubled as they had no equity.
Maybe it seemed easier to go bankrupt, nobody's hurt, right?
Maybe they were BTL landlords who never even saw the flat they were buying and they never got a tenant.


But the bottom line is: people stopped paying it back

GeorgeHowell

sadabbott wrote: »

lets go for communism. i like the safety it provides.

Like the safety that it provided for the victims of Stalin's purges ?

sadabbott

Ok OK - we have gone a bit off topic.

Why are we in the state we are in?

Lokolo

Because people like you keep worrying people and making things worse.

sadabbott

PasturesNew wrote: »

Those people then stopped paying back the loan.
Maybe they split up and got 4rsey and left the other one to pay it - and they couldn't/wouldn't.
Maybe they lost their job.
Maybe the missues got up the duff the minute they got the house.
Maybe they borrowed even more to fund a lifestyle they couldn't afford.
Maybe they fixed their mortgage for 2-3 years and had 100% mortgage interest only and when it came to remortgaging the price doubled as they had no equity.
Maybe it seemed easier to go bankrupt, nobody's hurt, right?
Maybe they were BTL landlords who never even saw the flat they were buying and they never got a tenant.


But the bottom line is: people stopped paying it back

A few people failing to make payments could not have caused this - surely!

Why does the government not just print a few pound notes and pay the bills?

SeanW

sadabbott wrote: »

A few people failing to make payments could not have caused this - surely!

Why does the government not just print a few pound notes and pay the bills?

Because then inflation rises, interest rates rise with it, so then do mortgage repayments and food bills, and nobody is better off, more cash in terms of units, but nothing more in terms of value.

If people start taking all their money out of banks, and banks still have to pay their own interest repayments and repayment of bonds, loands etc.. there comes a point the bank cannot continue, although it's not bankrupt as such, it's not not viable to continue the activities.

People borrowed and could not pay back, and banks have made losses on these because they where lending more than 100% the value of the assets the debt was secured on. Banks have bought debt that now has no value because it will not be repayed.