Thursday, November 15, 2007

Debt to sky rocket.

Plans made to 'nationalise' Northern Rock

Treasury insiders have calculated that the loan means that every British taxpayer is in effect lending £730 to the Newcastle-based bank.

Posted by sold 2 rent 1 @ 09:49 AM (2001 views)
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29 thoughts on “Debt to sky rocket.

  • Interesting for the comments alone.

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  • tyrellcorporation says:

    ‘Bidders are pressuring ministers by claiming they will save valuable jobs in the North East in Labour heartlands, but such plans may need more lenient lending conditions.’

    Ahhhh…

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  • This is the final stage of the 80 year debt cycle where debt levels as a percentage of GDP go vertical.

    This debt blow-off includes all sectors (household, public and corporate debt).

    If we tip into recession by the end of 2008, I have read that there is a 2 year time lag where debt keeps expanding whilst the economy contracts. Finally by 2010 the debt reaches its limit as default/repossession rates exceed “newly created” debt and like a rocket out of fuel it crashes back to earth.

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  • GAAAAAAAAAAH.

    Can I get interest on the 730 quid they are borrowing from me? Can their mortgage holders get their interest payments cancelled?

    Didn’t think so.

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  • the northerner living in oz says:

    Why should the U.K taxpayer fund the profits of the private equity group
    That is trying purchase Northern rock?

    It should be the share holders of northern rock that pay the bill

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  • The regulatory authorities should be held accountable for allowing this debacle to manifest itself in the first place – the Government can (IMHO) provide short term support and manufacture a “rescue plan” but many now think this is the equivalent of re-arranging the deckchairs on the Titanic. Will Mr King’s moral hazard argument win through?

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  • get this out on Sky news now, lets face it, the BBC “ministry of truth” would never push this out at 6pm

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  • The betting on Newcastle United’s new logo/sponsor is: Bank of England 5/4; HM Treasury 6/4; UK Taxpayer 7/1; Virgin Crock 100/1

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  • Fedupwithhouseprices says:

    Disgusting!!! No wonder the tax man is getting heavy about getting as much money in as possible. Did anyone bail me out when I lost my house in the last recession of the late 80s early 90s? No! Apparently that was my fault!

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  • If they Nationalise it, they are admitting that they are all totally incompetent, because nobody else wants to pick up the mess.

    I very much doubt that GBH and his little Darling would have the guts to face the inevitable hostile questions from the media. I bet that that they will fob it off in the “true” spirit of Private Enterprise to some newly formed holding company that is just a front for another Quango. This in turn will slice and dice the problem and sell it on to a pack of foreign buyers.

    In the end the Taxpayer will pay the bill for this one and Foreign Investors will make a killing out of it. So is the Taxpayer (electorate) just a bunch of nuts for letting this happen ??? or should GBH pull up his socks and sort out the problem that he and Bliar created in the first place.

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  • I remember seeing an article at earlier stage of the NR crisis, that the BoE blocked Lloyds TSB’s move to take over NR, “for fear it should upset the market”. Funny and suspcious isn’t it? Why didn’t they stem the crisis at that point by encouraging Lloyds TSB rather than stopping it, resulting into a full-scale crisis. I feel things are not that straightforward as has been reported, but something more sinister is involved.

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  • planning4acrash says:

    Damn, I was going to spend that 700 squid on a flat screen telly : (

    But really, this is new money generated from nowhere, presumably funded by the Chinese via UK Gilts, packaged into CDO’s, so if it all fails? Well, the Chinese and your pension fund suffer.

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  • How much impact will this have on public spending ? Is this going to pretty much mean the end of the welfare state ? How many jobs will be lost ? I guess no-one knows for sure right now. Is this really the end of the world as we know it ?

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  • If all involved in this affair are true free-market capitalists as they all would have us believe, NR would have crashed and burned as its high-risk business model became unsustainable. Instead the true system is revealed, where private investors make the lion’s share of vast amounts of cash when the going is good and as soon as things go a bit wrong, the investor’s income is topped up by the taxpayer – win-win for them, lose-lose for the rest of us.
    When anyone objects, they simply threaten to take away jobs.

    The truly astounding thing about this state of affairs is that people actually believe this is how a market works, and so not only do they not object to it, they actually support it as the ‘best way’, ridiculing any alternatives!

    The whole think leaves me utterly sick.

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  • @ S2R

    “This is the final stage of the 80 year debt cycle where debt levels as a percentage of GDP go vertical”

    What does that mean? And why 80 years?

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  • If this was a normal business going bankrupt they would sell off the collateral and pay back the creditors (our government). But this would mean forced refinancing of thousands of mortages and probably thousands of repos. Apart from political suicide this seems quite cruel to me. The alternative is to sell the business on to some company. But since everyone with sense expects UK house prices to crash who wants to buy Northern Rot now? If had a mortgage from Northern Rot I would be worried.

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  • One for sorrow – Magpies. The bird is famous for stealing shiny objects – how apt is that. lol

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  • Northern rock is a building society and as such a profitable business.
    When house prices return to sensible levels this will not change the mortgage commitments of home-borrowers, one bit.

    Making extravagant loans is great business, the higher the loan, the greater the profits to the lenders, obviously.

    A drop in prices is not co-equal with repossessions, so there is not too much worry about the housing collateral going forward.

    It is also not clear at this stage whether the US market in high-risk loans is anywhere near as bad here in the UK. I do reckon the management of Northern rock were caught off guard. Let’s face it, the market in bad-debt derivatives have carried on for another 6 months. Enough investors must have eventually decided to call the bluff and the timing of a crunch is bound to be difficult to get right. But some investment banks made a colossal amount of money shorting Northern Rock stock… interesting.

    In finance, timing is everything. But one thing is fairly constant with respect to time and that is hundreds of thousands of 25+ year house loans agreements.

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  • Takemebacktolondon says:

    I am a bit of a retro junkie and I find it rather nostalgic to hear that the Northern Rock basket case could be nationalised. Maybe they could call it British Leyland and brand their duff mortgage and savings products under the Allegro, Marina, Ital brand names, how appropiate would that be.

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  • It will go bust I think soon. Not even crash can justify keeping it afloat…

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  • japanese uncle says:

    Hiring a battalion of decoy depositors and let them rush to a brach to make a queue. Send a media camaramen to take photo of the queue and spread the news via national/international media. Very easy for those who can have influence on all concerned parties, including the BoE. I am beginning to realize why the BoE blocked the Lloyds TSB move to take over NR for absolutely illogical reason, such as “for fea ait might upset the market”. Someone wanted a dynamite, not a squib. Another world’s easiest billions were earned, nay nicked.

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  • Interesting…
    And continuing with the theme of kicking-in a scape-goat lender, we can now see attempts to demonize the management. Re. “Boss sold shares whilst encouraging employees to keep buying.” Hard for ordinary punters to see the truth. Personally I take this story and others like it with aa pinch of salt. It does drive down the stock yet further, so somebody is going to make a lot of money on the eventual upswing.

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  • japanese uncle says:

    NR’s business model was not very sound in the times of credit crunch. Still the bank was making a reasonable profit. Few market participants could predict such a sudden and precipitous demise of NR. This could well be the reality of the financial jungle. Anyway those who could stage this involving media, BoE, Treasury, etc. are not many. This smells like the old trick of the House.

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  • Nobody really knows what sort of business this is. The fact that its shares have fallen 90% this year suggests something. Of course people in this area expect the South of England to bail them out. What is the alternative?

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  • doapig, are you serious saying “Northern rock is a building society and as such a profitable business” ???

    It hasn’t been a building society since it dished out 500 shares (netting £2200 if sold at the time) to each of it’s account holders in 1997 to bribe them into allowing it to stop being a building society so it could create money out of thin air just like the “proper” banks.

    And it isn’t a profitable business if we all have to lend it 700 quid – it’s a diabolical mess that was fuelled by greed and incompetence, simple as…

    And the person who made it all possible in the first place??? – Take a bow Mrs Margaret Hilda Thatcher…

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  • dohousescrashinthewoods says:

    @shipbuilder, no wonder the stock markets are defying gravity. If this is hte case, I am going to be a very keen investor!

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  • JrH,

    2007 is 350pc of GDP

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  • “….Whitehall sources have revealed the Bank of England loan could rise to £30bn by the end of the year because more savers are pulling out the cash….”

    Well not many people expected that I bet.

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  • @JapaneseUncle on 11. Applegarth himself said that NR was painted into a corner by the other banks. The other banks must have know that their deposit ratios were in trouble, somebody was going to go down. I think that Barclays managed to squeal their way out from under the spear. They showed blood first after all.
    Now all of NR deposits are with the other banks. Who benefits most from the crime as the policeman said………………
    I certainly believe there was some dealing behind the scenes. Also, I know that about 50+ year upper middle class London bankers would not hesitate at all to choose NR as the sacrificial lamb. This was a perfect fait accompli. New Labour are already under media pressure because the bank that failed is in the heartland of their voters. Again, a complete surprise. Of all the banks in London, the one that seems to have managed to mortgage to people with good credit histories seems to have got in trouble…. while not being based in London and run by some young type.
    I talk to people from different companies in the same line of work as me, of course career bankers do. I don’t think they did any planning, I think the result simply “emerged” from their conversations.
    Like natural cartels emerge.

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