the credit crunch

The credit crunch.

We are in an economic recession, maybe some people will lose their job.
Who can we blame, how did it start. We hear this daily on the news, yet
what do we know about it. Personally I think that the media is only
frightening the consumers with their gloomy news reports.

And before I start I want to point something else the last recession that
we had was on 2000 now it is 2008, this is according to all text books normal.
Because every economic cicle takes around 7 years.

The credit crunch started in America with the banks giving “Ninia moorages”,
to people with no income and no job. Those people were unable to pay their
moorages and thus their houses came on the market. Yet those houses were
not being bought, and the house prices started to decline in general.
Unfortunally a lot of people took an extra loan because their house increased
in price over time and then the banks gave those people a loan,
with the over value of their house.

But then the house prices started to drop so their was no over value any more,
and the borrowing percentage started to rise. A lot of people had a loan with fluctuating borrowing percentage. So if they normally had to pay 500 each month for their moorage,
now with the increase of the percentage it became 700. So more people were unable to pay of their moorage of their over valued house, and so the house bubble busted.

This process started to happen all over the world and so the credit crunch started.
Because banks had a lot of “bad moorages” so the had to deducted these bad loans of their balance sheet, and they came to the conclusion that they were in serious trouble.
Now all the trust was gone between banks and they did not want to trade between each other anymore because of the distrust of the bad loans.
This stopped the money circulate, and this started the fallings of the banks, and the intervention from the governments.
Still even after the intervention of the government, banks were unwilling to borrow out money. This stopped the possibility of companies to invest and this resulted in the recession.

While this was happening everybody was blaming the banks and their CEO and their high salaries. Yet is was not all their fault. Because the governments gave their banks the assignment to make it affordable for all people to buy a house. This resulted in the “Ninia” moorages. I will admit that the banks made some grave mistakes, yet it is us consumers who created the real problem. Because we were buying stuff with money we did not posses, and now we get the bill for it.