Monday, January 7, 2008

Great Depression 2

Crisis may make 1929 look a 'walk in the park'.

'Twenty billion dollars here, $20bn there, and a lush half-trillion from the European Central Bank at give-away rates for Christmas. Buckets of liquidity are being splashed over the North Atlantic banking system, so far with meagre or fleeting effects'.

What happened in 1929 we hear you ask? The Great Depression is what happened, some have explained it in these simple terms, 'the Banks stopped lending on Thursday and asked for their money back on Friday.'

It seems that the Great Depression was caused in part by easy credit being offered to as many people as possible and then the inevitable credit crunch, allowing the creditors to buy back the security on these loans at drop down prices. It happens that the security on the loans is so frequently the homes where people live.

'A credit crunch is a sudden reduction in the availability of loans (or "credit"), which may be due to increased perception of risk, a change in monetary conditions, or even an imposition of credit controls.'

The 2007 subprime mortgage financial crisis is considered by some to have caused a credit crunch. wiki.

If the 'Times' is right in it's titled assumption we have hard times ahead. Batton down the hatches folks this could be the ride of a lifetime.

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