The Crisis
The financhial Crisis is ravaging through Europe. While many arrogant europeans will say this is the U.S. fault (And they will. The sub-prime loans where pretty exclusively a U.S. thing) they are sorely misstaken.
The constant hunt for maximized proffits made our own banks invest heavily in U.S. banks, who (atleast on budget) could show huge returns on investment from shitty loans. When things started to topple in the U.S., the European banks had to realize that their own investment was far from rock solid. Misstrust started spreading, as banks began to look around, realizing partners and competitors alike had built their houses on the same sand that they had. Some sceptical savers started withdrawing their money, and banks who normaly moved money around like it was air suddenly found themselves in a vacum.
Banks stopped lending to each other. Why would they? They where up to their neck in bad investments, and lending money to the next-bank-to-go seemed like the last thing they'd want. And soon worried investors, lenders and savers toppled the first bank. Then another.
Then the property prices went down. Hard.
In a country, prices on property goes up with the general productiveness of the population. The more people in jobs, the more people are competing for housing. The more prizes rise.
In Norway one of our problems is that 40% or so are working for the government... and those dont always contribute heavily to our actuall productiveness (People with a bit more Red in them than me would disagree. Those people are idiots.) So when the banks started feeling it, and the stockmarked started feeling it, companies soon felt the preasure. People stopped buying houses, even with a 10-20% drop in prices. The risk was simply too big. Nobody knew who'd have jobs tomorow.
(Note: In norway, a loan does not stay "on the house", its linked to the person. If you sell your house and it dosnt cover your loand, you're up the chocolate river without a popsickle stick. )
And the banks realized that their other major security, property, wasnt as solid as they had hoped either. They had to reasses their loans, push interest up and pray for a miracle. And companies felt more presure.
So money started raining down across europe, just like it had the U.S. No country could affoard the crisis that was fast aproaching. And for a few days, the financhial markets went up. But to a half trained eye, the 10% rise in a day didnt seem like healthy growth, but simply a flock mentality. Running for safety and maybe to recouperate some losses.
But has the problem been fixed?
The next days are crucial. I hope things turn around. but I have my doubts.
The constant hunt for maximized proffits made our own banks invest heavily in U.S. banks, who (atleast on budget) could show huge returns on investment from shitty loans. When things started to topple in the U.S., the European banks had to realize that their own investment was far from rock solid. Misstrust started spreading, as banks began to look around, realizing partners and competitors alike had built their houses on the same sand that they had. Some sceptical savers started withdrawing their money, and banks who normaly moved money around like it was air suddenly found themselves in a vacum.
Banks stopped lending to each other. Why would they? They where up to their neck in bad investments, and lending money to the next-bank-to-go seemed like the last thing they'd want. And soon worried investors, lenders and savers toppled the first bank. Then another.
Then the property prices went down. Hard.
In a country, prices on property goes up with the general productiveness of the population. The more people in jobs, the more people are competing for housing. The more prizes rise.
In Norway one of our problems is that 40% or so are working for the government... and those dont always contribute heavily to our actuall productiveness (People with a bit more Red in them than me would disagree. Those people are idiots.) So when the banks started feeling it, and the stockmarked started feeling it, companies soon felt the preasure. People stopped buying houses, even with a 10-20% drop in prices. The risk was simply too big. Nobody knew who'd have jobs tomorow.
(Note: In norway, a loan does not stay "on the house", its linked to the person. If you sell your house and it dosnt cover your loand, you're up the chocolate river without a popsickle stick. )
And the banks realized that their other major security, property, wasnt as solid as they had hoped either. They had to reasses their loans, push interest up and pray for a miracle. And companies felt more presure.
So money started raining down across europe, just like it had the U.S. No country could affoard the crisis that was fast aproaching. And for a few days, the financhial markets went up. But to a half trained eye, the 10% rise in a day didnt seem like healthy growth, but simply a flock mentality. Running for safety and maybe to recouperate some losses.
But has the problem been fixed?
The next days are crucial. I hope things turn around. but I have my doubts.