Good morning and welcome to the blog. This letter is about the debt crisis and the need to keep out of the coming downpour.
‘What debt crisis,’ my neighbour said over the fence. ‘I have so much debt of my own in credit cards, store debt and mortgage to pay off, I don’t want to know about anybody else’s debt.’
I said: ‘This debt pile is so large it seems to go almost up to the sky. It scares even me, and I’m the debt king. It belongs to the world’s largest banks and investment banks, who are piling up debts of as much as half a trillion to a trillion dollars.’
‘Can you imagine one million houses each worth say $1 million. That’s the size of this debt pile. One million times one million equals one trillion. Or more simply one with 12 noughts. Even the biggest shopaholic, who shops without stopping from dawn to dusk seven days a week for 10 years couldn’t get through that pile.’
‘Given my own household debt and vanishing savings,’ my neighbour said, ‘you’re talking of so much money, you’re losing me. But if you have so much to throw around, I can balance my budget if you could throw a bit my way. Any way, why worry me with all this talk of debt. I haven’t any sympathy for the big banks, who are so mean with their loans and their rip off fees, I couldn’t care less.’
‘Well you better care’, I said, because this is going to concern you and everybody else.
Liquidity in the world banking system is drying up. Banks are even scared enough to stop lending to each other. And when liquidity dries up, banks can’t function properly and eventually this economy and all the others could start to falter and jobs will be lost. I’m not exaggerating to say it’s the biggest financial crisis since the depression of the 1930s.’
‘What infuriates me,’ I added. ‘It’s all due to massive greed on the part of people in the banks, investment banks, the shark like hedge funds, the private equity funds, the sovereign wealth funds, and even the pension funds all shared in the spoils.
My down to earth neighbour practical as ever said : ‘if you’re going to scare me to death, you better wait until you see me next time, because I’m going to have a strong cup of tea and lie down.’
