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Anatomy Of A Financial Meltdown

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http://www.independent.co.uk/news/business...ars-799641.html

Anatomy of a financial meltdown: The slightly worried person's guide to the global economy

Worried? Confused? Who wouldn't be, with stock market panics, credit crunches and collateralised debt obligations not looking too clever? Here is our guide to the present mess and the people who got us into it:

Sub-prime: Loans given to people whose request would previously have been laughed out of the bank. But the business-hungry credit industry started to hand out money like confetti and sell these loans on to banks.

Collateralised Debt Obligations (CDOs): Fancy name for the sub-prime mortgages bundled up into "products", marketed as the next sure thing and sold to banks. They didn't really understand the full risks. Result: the implosion of Northern Rock.

Bear Stearns: US investment bank heavily into sub-prime mortgages. As it teetered on the edge of collapse, a sale was agreed to JPMorgan, backed by the US Federal Reserve.

Short-selling: Trader A believes company C's share price will fall. He agrees to sell to B its stock (which he doesn't yet have) at today's price on an agreed date in the future. The idea is the price will fall, A will buy at this lower rate and sell to B at the agreed higher price.

'Trash and crash': A variation of the above, whereby A ensures a fall in company C's share price, and thus his profits, by instigating rumours of trouble at C.

'Pump and dump': The reverse of the above, where shares are talked up, and sold at a higher price. Hey presto, they then fall.

Banks: Institutions where you leave your money so they can invest it, make huge profits and charge you for the privilege.

Credit crunch: Happening now – a sudden reluctance to lend as banks realise they've bought into too many dodgy risks. Home-hunters are finding that banks are suddenly no longer willing to offer a 100 per cent mortgage on a garden shed.

Housing market: Mechanism by which entire societies are convinced the only way to insure against trouble with their pensions is to own assets that will go on appreciating for ever.

Negative equity: When the asset you've borrowed for is worth less than the loan you took out. Oops.

Foreclosure: When a mortgage company calls in the loan ahead of its expiration date. In reality, two large men on your doorstep with a court order to put you on the street.

Buy-to-let: Get-rich-quick scheme by which people were told that if they borrowed money to purchase homes they could make vast profits renting to the property-less classes – ironically not the case.

Six-figure bonus: What the people responsible for all this mess will get, but the rest of us won't.

David Randall

:lol:

Edited by Buffer Bear

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CDO's have to be the biggest scam ever. I mean they amount to selling empty promises. That's something NL have excelled at, but you would hope the banks would be a bit smarter seeing as they are run by the intellectual cream of society, or so the city boys that post here would have us believe.

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CDO's have to be the biggest scam ever. I mean they amount to selling empty promises. That's something NL have excelled at, but you would hope the banks would be a bit smarter seeing as they are run by the intellectual cream of society, or so the city boys that post here would have us believe.

Weekly/Monthly/Annual Bonus = £1 million+ = short termism = take the money and run.........

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  • 292 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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