Who caused the recession? Who? who? who?

Right here is a quick summary of how the credit crunch and the 08/09 recession happened and who is to blame. Why am I telling you these things? Well everyone likes to rant about these things… or at least I do and if we’re going to rant we might as well do it properly.

After all you can’t go bashing the wrong people, that would be just wrong, wouldn’t it.

1. China develops in to a massive economic power. The industrialisation of China meant that the world economy was booming. Lots of money was being made by China which meant there was lots of money to be made IN China. As a result there was lots of money freely available to the world economy. That is good right? Yep, it is good for everyone, unless of course you are a bank in which case it means that you can’t rip people off when they borrow money because it is so freely available. This means interest rates are low and the banks don’t make huge profits off lending like they would normally, unless of course you lend to people who have rubbish credit ratings and shouldn’t really be given the money because they probably can’t afford it! This credit is called ‘sub-prime’ and you can rip these people off by charging high interest and you, the greedy bank, can make a fat lot of cash, that is the theory anyway….

2. Thick American mortgage lenders started lending lots of money to people to buy houses that they couldn’t afford.

Now to begin with this doesn’t sound like anything serious, I mean if you lend money to people and they don’t keep up payments that isn’t your fault right? Well usually yes, in this case… seriously no.

First these thick Estate agents (realtors) would give a mortgage on one set of payments and often not really explain that in two years the cost of the payments would go up… now even the thickest most delinquent person can realise that poor people who can only just afford the first payment are not going to be able to pay the new increased rate in two years. As a result they will default.

Second these people cared so little about whether they would actually pay the monthly instalments that they would accept ‘stated income’ which is where you provide no proof of what you earn you would just tell them and they would take word for it. Good to know the system wasn’t open to abuse, idiots.

Third the people who were selling these mortgages would get up to $10,000 in commission so obviously they would give them to anyone who had a pulse. Some people were made millionaires selling these things.

Apparently even the president at the time (GW Bush) thought they were a good idea and endorsed these mortgages in a speech. But then he was never going to be able to criticise them because most of these mortgages were being given to low income Hispanics, which means if he said that they should be more careful he would look like a complete and utter racist/class bigot.

3. These mortgages were bundled together (good ones and bad ones) and the their risk was sold across the world to other banks including the major financial centre of the world…. London.

London’s mistake was that it didn’t bother checking what mortgages were in these risk bundles they were buying so when the American banks when to the wall they didn’t know whether they were holding a bag full of money or a bad full of rabid rats…. As a result everyone freaked out and stopped lending to each other not going what cards they were holding. This freeze on lending prevented everyone getting credit and thus the ‘credit crunch’ began.

4. Who’s fault is it? Well I am never one to start pointing out who is to fault, ha ha ha aha ha ah, ok maybe I am.

Over in the US it is the retarded banks who thought that trying to rip off poor people would be a good idea to get some extra cash.

Over here in the UK it was the stupid banks who bought the liability of other banks without really knowing what was there, but then there are people who are meant to be checking the banks are behaving themselves, what were they doing?

There is a nice little speech that was made by Gordon Brown to the British financial industry. He said (I paraphrase) ‘I was told to regulate the banking industry and I didn’t and look how well it has all turned out’. This was said a year or two before the crunch kicked off obviously. Opps, poor Gordon now you look like a bit of a burke!

So how to summarise? Hmmmm…

Well if you’re an American I guess you blame the morons who gave money to people who couldn’t afford it and didn’t tell them they were going to be paying a fat lot more in 2 years time, easy enough really!

If you’re British I guess you blame the retards in the banks who thought that it would be a good idea to purchase risk from mortgagors and not check how much of this risk was sub-prime and how much was from people who could actually pay their bills… or blame Gordon Brown for not regulating those banks.

I’m not sure if regulation would have actually stopped the banks cocking the whole lot up but what can I say, I’m just mad at him because he won’t call a election.