Growing Evidence That The Upturn Is Upon Us
Join Date: Dec 1999
Location: UK
Posts: 1,608
Likes: 0
Received 0 Likes
on
0 Posts
The ECB runs policy to suit the Germans and French.
As far as Ireland goes, it is not going the same way as Iceland, as it cannot inflate its way out of the debt problem (as Italy and Greece for example did in the past). Instead it must deflate painfully, causing wages to fall - not ony a hard economic task, but a painful political task.
Expect governments there to fall, but ultimately the Celtic tiger will get through it, and survive.
Join Date: Sep 2008
Location: Bristol
Age: 43
Posts: 10
Likes: 0
Received 0 Likes
on
0 Posts
I cannot believe what i'm reading sometimes on these forums.
We are entering a depression and there are people with their heads firmly planted in the sand, still wishing to spend money on pilot training/type ratings. Not to mention competing with those qualified laid off captains/FO's with 1000's of hours.
This system has been built on greed and credit. People did not take heed from the Dotcom bubble bursting. So the sheeple moved on to the next Boom and Bust scheme: Housing.
I'm sorry, but I saw this coming, sold my house in october '07, Rented a flat, started flying training but as much as it hurt, quit it late 08.
This country is bankrupt for real.
I don't care if anyone calls me a pessimist. I was being serious in my last post.
Join Date: Oct 2008
Location: On the high side
Posts: 68
Likes: 0
Received 0 Likes
on
0 Posts
Sounds to me more like you quit 'cause you hadn't the balls to see it through. How far did you get through your training?
What does bankruptcy mean on a national level? That there's no money in the bank? Can you show me that money they talk of? Can the government withdraw that out of the national bank? It's all relative, it's all an instrument to measure productivity at that level. It takes on a completely different meaning. I think you're listening to the media far too much.
With Obama in power I can see green energy being the next big investment. The fact he mentioned it in the inauguration means a lot. But, even that said, basic human consumption will continue, people will die, people will be born, life goes on and so does human movement. People want to get around and always will.
Like I said to you, chill out a little!
What does bankruptcy mean on a national level? That there's no money in the bank? Can you show me that money they talk of? Can the government withdraw that out of the national bank? It's all relative, it's all an instrument to measure productivity at that level. It takes on a completely different meaning. I think you're listening to the media far too much.
With Obama in power I can see green energy being the next big investment. The fact he mentioned it in the inauguration means a lot. But, even that said, basic human consumption will continue, people will die, people will be born, life goes on and so does human movement. People want to get around and always will.
Like I said to you, chill out a little!
Join Date: Dec 2000
Location: Samsonite Avenue
Posts: 1,538
Likes: 0
Received 0 Likes
on
0 Posts
There is no sign of a upturn here in the UK and 2009 will undoubtedly be a 'Annus Horribilis'.
I was made redundant in December and I am lucky to get another flying job to see me through for a year or two but this is not in Europe. Only a handful of my former colleagues are flying again and most of them are flying out of Europe where the effects of the economic strain are felt to a lesser extent. The UK aviation industry is quite frankly... on its knees!
One former colleague of mine said that he was on the phone to one of the contract agencies recently. The lady at the other end of the phone said she even had a number of TRIs and TREs who were out of work and that any remaining opportunities are drying out quickly. This could be worse and more prolonged than 9/11! Sorry if this is not what you want to hear!
I was made redundant in December and I am lucky to get another flying job to see me through for a year or two but this is not in Europe. Only a handful of my former colleagues are flying again and most of them are flying out of Europe where the effects of the economic strain are felt to a lesser extent. The UK aviation industry is quite frankly... on its knees!
One former colleague of mine said that he was on the phone to one of the contract agencies recently. The lady at the other end of the phone said she even had a number of TRIs and TREs who were out of work and that any remaining opportunities are drying out quickly. This could be worse and more prolonged than 9/11! Sorry if this is not what you want to hear!
"Chill out a little."
The words there of a mindless ignorant moron too young to know anything different - and now, Charlotte, back to the Studio..
Kent Brockman mode OFF
I think you're listening to the media far too much. They mostly spin that things are going to be OK, that this is an event and that the Government can save everyone/everything.
You're not. Its forever. They can't.
Welcome to the new world. Not like the old world.
WWW
The words there of a mindless ignorant moron too young to know anything different - and now, Charlotte, back to the Studio..
Kent Brockman mode OFF
I think you're listening to the media far too much. They mostly spin that things are going to be OK, that this is an event and that the Government can save everyone/everything.
You're not. Its forever. They can't.
Welcome to the new world. Not like the old world.
WWW
Join Date: Oct 2008
Location: On the high side
Posts: 68
Likes: 0
Received 0 Likes
on
0 Posts
The words there of a mindless ignorant moron too young to know anything different
You all make it sound like doomsday is upon us. I know things aren't as good as they were but it can't last forever. Anyways, my aim isn't to prove myself right and you all wrong. I just wanted to put my opinion out there 'cause I was sick of the doom and gloom talk. Job done. Cya later....
Join Date: Jun 2008
Location: Just a bit lower than the point where the falling angel meets the rising ape
Posts: 213
Likes: 0
Received 0 Likes
on
0 Posts
Rather forward words to describe somebody unbeknown to yourself, WWW
Sounds to me more like you quit 'cause you hadn't the balls to see it through. How far did you get through your training?
Join Date: Nov 1999
Posts: 2,312
Likes: 0
Received 0 Likes
on
0 Posts
Imagine a scenario.
A couple of years ago I had a major change in my financial situation brought upon me by, lets say a divorce. Failing that lets say I had gambling or loan debts that needed settling. Perhaps I bought a house and could no longer afford the repayments. Perhaps I had built up an unmanagable level of debt that simply needed urgent attention. These are a few of the things that might affect anyone at some time in their lives. As a result of these unfortunate events, I had to liquidate anything of any value. I sell the home I cherish, I have to sell anything that has a cash value such as my personal pension or any stocks and bonds I might be holding on to. I cannot afford to run the car, what with the price of oil (petrol,) but that is only one element of the overall running cost. I warn others not to attempt what I achieved for their own good. Despite these setbacks in my life, I meet someone else, we get engaged and I buy her a ring. Clouds have a tendancy to clear eventually.
If any or all of these had happened to me, I could spin these using exactly the same words as WWW has already used:
Now I am an expert!
It really depends on your perspective. Economies are extremely complex entities that are massively interactive, and interdependent with a huge amount of randomness built in. In many ways they are similar to casinos. They depend on a large number of punters walking through the door. Everyone plays to set a rules (stacked in favour of the house.) However the punter also plays to a set of their own rules. How much risk they will take, are they playing with cash or credit, entertainment, need, compulsion? Do they play at all? Are they there having invested in the business, or are they simply spectators who have their interests elsewhere? In any economy there always a few people who get very lucky betting against the odds. If you believe one of the fundamentals of Keynesian economic theory that "Profit is payment for risk", it follows that the level of risk required will be very high if the goal is high profit. However the word "risk" needs to be understood.
The rules in this casino are also inconsistent. In some games the house is permitted to improve its odds by cheating. In the real world, if two airlines conspire to fix their ticket prices for passenger seats on a given route, or for cargo rates across a particular ocean, they are subject to punitive government sanctions and those responsible threatened with incarceration. However when those same governments have a commodity (say oil) that they want to fix the price of , they are offered complimentary 5 star accomodation to make their task as comfortable and easy as possible. Of course if the customer can't or won't pay the price, then the seller either has to absorb the loss of revenue or drop the price again. It seems only a few months ago that $150 oil was here to stay, and the volitility of the market with all of the distortionary elements caused many to act on the basis of even higher prices. However the complexities and randomness resulted in economies contracting sharply and the customer base falling away. The frenetic action moved away from that particular table game, as queues started forming outside the cashiers office amid rumours that the house was no longer prepared to make credit card cash advances. On and on it goes!
Without doubt there is currently a sharp and severe economic downtown. Perhaps not for everybody, but certainly for the majority. Even those who are less affected will be impacted by their own exposure to things such as their customer base. Many people will be negatively affected and some disasterously so by events that result from this downturn. Given the realities as they stand, or perhaps more importantly as they are perceived, should everyone stop spending and hide behind the sofa? That is the popular wisdom and it is forgivable that in an uncertain market people are frightened and feel vulnerable.
I cannot help but smile that on an aviation discussion board such as this it seems to be "wicked" to allow any rumour or speculation about an airline on the grounds that it might trigger a self fullfilling prophecy, yet when it comes to the aviation training industry, all comers should be discouraged, addressed with insults (morons? zombies?) or otherwise derided. It really doesn't matter that an individual or any group of individuals want to spend large sums of cash on flight training. It really doesn't matter that there may be little or no chance of subsequent employment at this time. If those individuals and or their parents and or their bank managers feel they want to take the risk or make what they see as the investment, that is entirely up to them and it is entirely up to them to calculate the risk (if there is one) as they see fit. There is an industry that relies on these customers for its own survival, and it is fundamentaly wrong and probably pointless to interfere with the marketplace.
Airlines still need to sell seats to places that people might be equally ill advised to go to. That stag weekend in Prague or Athens is probably poor value with beer at £5 a pint, but if the excitement and adventure can still be sold to the customer, then the airline still sells the product. In other words talking down the market is easy, particularly when the market is heading that way in any case. Nevertheless people (even if far less of them) will still pay for that two weeks in the sun or that week on the ski slopes. They will still have to travel on business and eventually the fear and uncertainty will become tiresome and confidence and inevitably overconfidence will return.
When that will be, I haven't a clue and anyone that says that they do, is either basing it on past experience, a set of models or simply guesswork. It might be 6 months, it might be be 6 years, it might even be 60 years. The important word is might. Anyone who can accurately foretell the future wouldn't be wasting their talents on any of these forums, they would be looking forward to a future that (even in the best of times) aviation would never afford them. If the pundits guess a few things right (and they will) they will continue to draw attention to their "wisdom and talents", if they get a few things wrong (and they will) they won't remind anybody, other than to highlight the vagaries of the world economy?
For what it may be worth, I wouldn't advise anybody to go out on a limb in this market, for the simple reason that very few people can afford to take that sort of risk. However if you are fortunate enough or indeed foolish enough to do so, then you do so based on your own perceptions and desire. Commercial flight training is an expensive undertaking, but then so are other things, and it is up to you to do your own research and decide on the level of risk (if any) you want to be exposed to. Whatever may prove to be the rotation speed of the current economic cycle, it is not the case that there is ever an overnight shortage of qualified low houred pilots just waiting to pounce on a sudden glut of airline vacancies. When the upturn does eventually come, the vacancies will be mopped up by the likely plethora of qualified and experienced pilots who may not only have been out of work, but may have simply put off career change and advancement whilst also waiting for the improvement. Embarking on a 18 month to 2 year training plan at the recognised signs of a recovery would not realistically put a wannabee pilot at any material disadvantage in isolation of all the other realities, (there may still be very limited credit, prices may be higher, wages may be lower, regulatory requirements may have changed etc.)
Individuals are very seldom "morons" or "zombies", they are driven by the same set of emotions, rationalities and irrationalitities, desires, aspirations, fears, ego, and instincts, that we all are. Good times or bad that will never change. Even in the depths of recession or depression, people will still need a roof over their head, will still aspire to own that roof whatever the cost, will still desire a better roof. People will still want the best and better for themselves and their children. Just as when times are good, some will go broke in pusuit of those desires and others wont. Those that are lucky and more so those that plan carefully, will probably avoid the worst risks of any recession. For some that do suffer the worst effects things will probably get better. In fact I seem to recall reading on these very forums not too long ago, the advocacy of bankruptcy as a positive way forward? Perhaps this "expert" business is easier than I thought? Anyone got a bigger soapbox for sale?
A couple of years ago I had a major change in my financial situation brought upon me by, lets say a divorce. Failing that lets say I had gambling or loan debts that needed settling. Perhaps I bought a house and could no longer afford the repayments. Perhaps I had built up an unmanagable level of debt that simply needed urgent attention. These are a few of the things that might affect anyone at some time in their lives. As a result of these unfortunate events, I had to liquidate anything of any value. I sell the home I cherish, I have to sell anything that has a cash value such as my personal pension or any stocks and bonds I might be holding on to. I cannot afford to run the car, what with the price of oil (petrol,) but that is only one element of the overall running cost. I warn others not to attempt what I achieved for their own good. Despite these setbacks in my life, I meet someone else, we get engaged and I buy her a ring. Clouds have a tendancy to clear eventually.
If any or all of these had happened to me, I could spin these using exactly the same words as WWW has already used:
You wonder about my credentials on economics? Sold my house in April 07 to rent because I feared a house price crash. Took all my pension and savings out of the Stock Market at FTSE 6200. Called Oil a bubble that would burst by Xmas 08 in March 08. Warned every wannabe, despite ridicule and condemnation, that training was wasted since Sept 07. Bought Gold.
It really depends on your perspective. Economies are extremely complex entities that are massively interactive, and interdependent with a huge amount of randomness built in. In many ways they are similar to casinos. They depend on a large number of punters walking through the door. Everyone plays to set a rules (stacked in favour of the house.) However the punter also plays to a set of their own rules. How much risk they will take, are they playing with cash or credit, entertainment, need, compulsion? Do they play at all? Are they there having invested in the business, or are they simply spectators who have their interests elsewhere? In any economy there always a few people who get very lucky betting against the odds. If you believe one of the fundamentals of Keynesian economic theory that "Profit is payment for risk", it follows that the level of risk required will be very high if the goal is high profit. However the word "risk" needs to be understood.
The rules in this casino are also inconsistent. In some games the house is permitted to improve its odds by cheating. In the real world, if two airlines conspire to fix their ticket prices for passenger seats on a given route, or for cargo rates across a particular ocean, they are subject to punitive government sanctions and those responsible threatened with incarceration. However when those same governments have a commodity (say oil) that they want to fix the price of , they are offered complimentary 5 star accomodation to make their task as comfortable and easy as possible. Of course if the customer can't or won't pay the price, then the seller either has to absorb the loss of revenue or drop the price again. It seems only a few months ago that $150 oil was here to stay, and the volitility of the market with all of the distortionary elements caused many to act on the basis of even higher prices. However the complexities and randomness resulted in economies contracting sharply and the customer base falling away. The frenetic action moved away from that particular table game, as queues started forming outside the cashiers office amid rumours that the house was no longer prepared to make credit card cash advances. On and on it goes!
Without doubt there is currently a sharp and severe economic downtown. Perhaps not for everybody, but certainly for the majority. Even those who are less affected will be impacted by their own exposure to things such as their customer base. Many people will be negatively affected and some disasterously so by events that result from this downturn. Given the realities as they stand, or perhaps more importantly as they are perceived, should everyone stop spending and hide behind the sofa? That is the popular wisdom and it is forgivable that in an uncertain market people are frightened and feel vulnerable.
I cannot help but smile that on an aviation discussion board such as this it seems to be "wicked" to allow any rumour or speculation about an airline on the grounds that it might trigger a self fullfilling prophecy, yet when it comes to the aviation training industry, all comers should be discouraged, addressed with insults (morons? zombies?) or otherwise derided. It really doesn't matter that an individual or any group of individuals want to spend large sums of cash on flight training. It really doesn't matter that there may be little or no chance of subsequent employment at this time. If those individuals and or their parents and or their bank managers feel they want to take the risk or make what they see as the investment, that is entirely up to them and it is entirely up to them to calculate the risk (if there is one) as they see fit. There is an industry that relies on these customers for its own survival, and it is fundamentaly wrong and probably pointless to interfere with the marketplace.
Airlines still need to sell seats to places that people might be equally ill advised to go to. That stag weekend in Prague or Athens is probably poor value with beer at £5 a pint, but if the excitement and adventure can still be sold to the customer, then the airline still sells the product. In other words talking down the market is easy, particularly when the market is heading that way in any case. Nevertheless people (even if far less of them) will still pay for that two weeks in the sun or that week on the ski slopes. They will still have to travel on business and eventually the fear and uncertainty will become tiresome and confidence and inevitably overconfidence will return.
When that will be, I haven't a clue and anyone that says that they do, is either basing it on past experience, a set of models or simply guesswork. It might be 6 months, it might be be 6 years, it might even be 60 years. The important word is might. Anyone who can accurately foretell the future wouldn't be wasting their talents on any of these forums, they would be looking forward to a future that (even in the best of times) aviation would never afford them. If the pundits guess a few things right (and they will) they will continue to draw attention to their "wisdom and talents", if they get a few things wrong (and they will) they won't remind anybody, other than to highlight the vagaries of the world economy?
For what it may be worth, I wouldn't advise anybody to go out on a limb in this market, for the simple reason that very few people can afford to take that sort of risk. However if you are fortunate enough or indeed foolish enough to do so, then you do so based on your own perceptions and desire. Commercial flight training is an expensive undertaking, but then so are other things, and it is up to you to do your own research and decide on the level of risk (if any) you want to be exposed to. Whatever may prove to be the rotation speed of the current economic cycle, it is not the case that there is ever an overnight shortage of qualified low houred pilots just waiting to pounce on a sudden glut of airline vacancies. When the upturn does eventually come, the vacancies will be mopped up by the likely plethora of qualified and experienced pilots who may not only have been out of work, but may have simply put off career change and advancement whilst also waiting for the improvement. Embarking on a 18 month to 2 year training plan at the recognised signs of a recovery would not realistically put a wannabee pilot at any material disadvantage in isolation of all the other realities, (there may still be very limited credit, prices may be higher, wages may be lower, regulatory requirements may have changed etc.)
Individuals are very seldom "morons" or "zombies", they are driven by the same set of emotions, rationalities and irrationalitities, desires, aspirations, fears, ego, and instincts, that we all are. Good times or bad that will never change. Even in the depths of recession or depression, people will still need a roof over their head, will still aspire to own that roof whatever the cost, will still desire a better roof. People will still want the best and better for themselves and their children. Just as when times are good, some will go broke in pusuit of those desires and others wont. Those that are lucky and more so those that plan carefully, will probably avoid the worst risks of any recession. For some that do suffer the worst effects things will probably get better. In fact I seem to recall reading on these very forums not too long ago, the advocacy of bankruptcy as a positive way forward? Perhaps this "expert" business is easier than I thought? Anyone got a bigger soapbox for sale?
Join Date: Jun 2008
Location: Just a bit lower than the point where the falling angel meets the rising ape
Posts: 213
Likes: 0
Received 0 Likes
on
0 Posts
Personal responsibility will be the watch words of the future
On the subject of FTO's, you're dead right. Caveat emptor and all that. It's important that those who go to be dazzled by the bright lights and the shiny toys have access to other opinions regarding the nature of flight training, in order to come to a balanced decision. So viva la proon! The place to come to in order to offset the glossy brochure syndrome. I think in the long run, this site will have saved me 40k and quite a lot of marital harmony, for roughly the same outcome. No mean feat!
And in the finest traditions of this thread, might I insert the link below. Love him or hate him, WWW has been saying this for a while, even when many, many others were not!
BBC NEWS | Business | UK in recession as economy slides
Regards
JR
I now know of 5 wannabes going down the Bankruptcy path. This trickle will turn into a torrent as the year wears on.
Todays figures showing a 4.5% contraction on the quarter for Manufacturing is just horrific. Thats an annual 18% contraction. The UK is the worlds 5th largest manufacturer. This is approaching depression level event.
This will be far far worse than the 1991 recession which sent Dan Air and Air Europe under and put hundreds of experienced pilots out of work. The next question is wether or not this recession will be worse than the 1980 recession.
WWW
Todays figures showing a 4.5% contraction on the quarter for Manufacturing is just horrific. Thats an annual 18% contraction. The UK is the worlds 5th largest manufacturer. This is approaching depression level event.
This will be far far worse than the 1991 recession which sent Dan Air and Air Europe under and put hundreds of experienced pilots out of work. The next question is wether or not this recession will be worse than the 1980 recession.
WWW
Join Date: Jun 2008
Location: Just a bit lower than the point where the falling angel meets the rising ape
Posts: 213
Likes: 0
Received 0 Likes
on
0 Posts
It's going to be a biggie. What am I saying, it is a biggie!
Interestingly, the same beeb article I read described the mean length of recession in GB as three quarters, with the last two going on for five quarters. Now that we're here, I wonder how long we're going to be here...
2010 for an upturn is looking ever more likely. Thank god my boss told me she'd keep me on 'til mid 2010. Must be my charm and devilish good looks
JR
Interestingly, the same beeb article I read described the mean length of recession in GB as three quarters, with the last two going on for five quarters. Now that we're here, I wonder how long we're going to be here...
2010 for an upturn is looking ever more likely. Thank god my boss told me she'd keep me on 'til mid 2010. Must be my charm and devilish good looks
JR
Join Date: Aug 2008
Location: Betwixt and between
Posts: 666
Likes: 0
Received 0 Likes
on
0 Posts
you cannot build an economy on debt where virtually the only 'industries' you possess are finance and house building.
Personal responsibility will be the watch words of the future
Join Date: Oct 2008
Location: On the high side
Posts: 68
Likes: 0
Received 0 Likes
on
0 Posts
but it would appear the guy is currently training for his CPL/IR which kind of gives you some background to his forever optimistic point of view.
I was watching that BBC programme last night with Michael Portello and they had a man by the name of Hutton on too who was giving severe warnings. He mentioned the IMF and that if it came to a point where Britain needed help not even the IMF could help because it only has a fund of 500 billion and Britain's debt goes beyond that!!! In the 1976 the IMF helped out Britain with 3 billion. It's not like things haven't been bad in the past. And the funny thing is when things turn around they often turn around as fast as you've seen this downturn. Ireland is an example of that.
Someone mentioned above that Ireland's problem is it is part of the Eurozone but on BBC last night they were saying that it is Britain's disadvantage not being part of the Eurozone. At the moment you're seeing a run on the pound, partly as result of Jim Rogers advice to sell Sterling. You need to join!
I am optimistic. I'm confident this period will pass. 2009 will be tough, probably 2010 for many too, but beyond that I'm hopeful. In Europe we will have the Oylmpics again. That will help London out a lot!
Join Date: Jun 2008
Location: Just a bit lower than the point where the falling angel meets the rising ape
Posts: 213
Likes: 0
Received 0 Likes
on
0 Posts
I am optimistic. I'm confident this period will pass. 2009 will be tough, probably 2010 for many too, but beyond that I'm hopeful. In Europe we will have the Oylmpics again. That will help London out a lot!
I think everyone has some faith/ confidence in this period passing. The alternative would see us driving round in souped up cars, wearing dodgy leather and wielding crossbows, or something. The smart money will be the money that figures out when this period ends, and what it is that will drag us all out of it.
I for one will be VERY interested to see what the Olympics does for us in the current climate. It may just be my innate english cynicism, but it was beginning to seem like a bit of a white elephant before the economy went tits up. Now......?
Regards to all,
JR
Join Date: Jan 2000
Location: UK
Posts: 955
Likes: 0
Received 0 Likes
on
0 Posts
Buoyant Forecast
It seems that some of the negative talk is not quite right..
BBC NEWS | Business | Easyjet issues buoyant forecast
BBC NEWS | Business | Easyjet issues buoyant forecast
Join Date: May 2003
Location: uk
Posts: 713
Likes: 0
Received 0 Likes
on
0 Posts
There is a simple truth. My spending is someones income. If I dont spend someone else wont get paid.
If there is the prospect of deflation the I will hold off spending if I think prices will go lower.
If there is inflation, I will buy early if I think prices will rise.
Think what you did during the fuel price changes.
Filled the tank when the prices were shooting up and half filled the tank as they are falling.
The end game of deflation is that we get an appetite for not spending - then we are all stuffed. The banks end up with a load of money they are unable to lend and everything shuts down.
Japan had been in the stagnacy of deflation for the last 15 years with interest rates at zero for most of it.
If there is the prospect of deflation the I will hold off spending if I think prices will go lower.
If there is inflation, I will buy early if I think prices will rise.
Think what you did during the fuel price changes.
Filled the tank when the prices were shooting up and half filled the tank as they are falling.
The end game of deflation is that we get an appetite for not spending - then we are all stuffed. The banks end up with a load of money they are unable to lend and everything shuts down.
Japan had been in the stagnacy of deflation for the last 15 years with interest rates at zero for most of it.
The period 2002 - 2007 marked irrational confidence.
What most people don't understand because they are never told is that money is debt. A bank has a million pounds. It lends all of it to me in exchange for a piece of paper called a loan agreement where I promise to pay it back plus interest. This piece of paper is a debt. As such a bank is allowed to call 8/9ths of it an asset. So it can lend out 8/9ths of a million pounds to someone else. They are compelled by international banking rules (BAsle II) to keep that ratio of 8/9th's intact. Guess what happens to the loan agreement (debt) for £900k... it is used to issue £720k of new loans. Which spawns £648k of new loans, which spawns.. you get the idea. Your £1m loan turns into a multi million pound lending frenzy.
But if you go bust or suddenly pay back the original £1m. All the other loans need to be recalled if Basle II deposit ratio rules are to be respected
These rules are currently being flouted and the regulators are ignoring this under pressure from the governments who are owned by the banks..
Leverage.
Money is debt.
Now the problem comes when people start NET paying off their debt rather than getting deeper in it.
If I repay the bank the million that I owe them and don't take out another loan then the maintain their capital adequacy rules (Basle II) they need to cancel £8 million of loans. It was my loan agreement for £1m that allowed them to lend another £8m and stay within the rules.. This is how banks create money out of thin air.
Banks are not afraid to lend to each other. Banks have the money to lend to people.
What banks are terrified of is people paying back their debts. Debt deflation. Or writing off their debt contracts by going bankrupt.
For every £1 written off or paid back the banks have to shrink their loanbook by 9 times.
Money is debt.
There is nothing easier than making money out of thin air if you are a bank. Which is why banking licenses are so rare, so fought over, so lucrative and so connected to political influence.
They don't even tell you that they don't teach any of this in school. They don't want you to know how banks and money works and what it is.
The biggest lie the devil ever told was that he didn't exist.
WWW
What most people don't understand because they are never told is that money is debt. A bank has a million pounds. It lends all of it to me in exchange for a piece of paper called a loan agreement where I promise to pay it back plus interest. This piece of paper is a debt. As such a bank is allowed to call 8/9ths of it an asset. So it can lend out 8/9ths of a million pounds to someone else. They are compelled by international banking rules (BAsle II) to keep that ratio of 8/9th's intact. Guess what happens to the loan agreement (debt) for £900k... it is used to issue £720k of new loans. Which spawns £648k of new loans, which spawns.. you get the idea. Your £1m loan turns into a multi million pound lending frenzy.
But if you go bust or suddenly pay back the original £1m. All the other loans need to be recalled if Basle II deposit ratio rules are to be respected
These rules are currently being flouted and the regulators are ignoring this under pressure from the governments who are owned by the banks..
Leverage.
Money is debt.
Now the problem comes when people start NET paying off their debt rather than getting deeper in it.
If I repay the bank the million that I owe them and don't take out another loan then the maintain their capital adequacy rules (Basle II) they need to cancel £8 million of loans. It was my loan agreement for £1m that allowed them to lend another £8m and stay within the rules.. This is how banks create money out of thin air.
Banks are not afraid to lend to each other. Banks have the money to lend to people.
What banks are terrified of is people paying back their debts. Debt deflation. Or writing off their debt contracts by going bankrupt.
For every £1 written off or paid back the banks have to shrink their loanbook by 9 times.
Money is debt.
There is nothing easier than making money out of thin air if you are a bank. Which is why banking licenses are so rare, so fought over, so lucrative and so connected to political influence.
They don't even tell you that they don't teach any of this in school. They don't want you to know how banks and money works and what it is.
The biggest lie the devil ever told was that he didn't exist.
WWW