Get all cash out of the bank

[Doonhamer]

Seriously get all your cash out of the bank as soon as possible.

It's only a matter of time before a High St bank in the UK fails again and the government won't be able to bail it out.

I appreciate the combined net worth of the board is around 50p but once people realise that 97% of 'money' doesn't exist in a tangible paper form there will be a stampede to get cash out.

But there won't be any.



I Don't want to spread alarm or anything.

As the OP, I bet that The General is pissing himself laughing at this thread .

[CL]

to blame politicians shows a complete misunderstanding of the situation. 2 sets are responsible for the mess.

firstly irresponsible financial institutions who lent way above their means (Northern Rocks loan to deposit ratio was 170% and therefore funding was entirely dependant on the wholesale money markets) and relaxed their lending criteria far too much (6 x salary and mortgages of 120% loan to value were always going to end in tears).

secondly irresponsible borrowers who borrowed far too much knowing they were never going to be able to pay it back and who in some cases lied about income and financial position to get bigger loans than they would otherwise have been able too.

Bladerunner I agree with much of what you're saying, but I have a question for you. What was the source of Northern Rock's money?

[CL]

As the OP, I bet that The General is pissing himself laughing at this thread .

Assuming he took his money out of the bank

[Bladerunner]

the source of Northern Rocks money prior the problems was the interbank loan market. when that dried up they got into big problems and for a while I would think they were borrowing heavily against the BOE.

Currently they've obviously got a government guarantee as they are nationalised but if they hadn't done that they'd have gone bust. for what its worth I would have let them go bust (and B&B for that matter) just to reinforce the risk part of the risk/reward relationship!!

[Stick]

What a thoroughly entertaining thread this is. No really, I do mean that!

I especially liked the discussion of terms twixt Chris and Wheeze on risk and chance. Surely both (words, rather than posters!) are subjective words to describe how a person feels about the underlying mathematical Probability (...a very precise term).

Interestingly, in business terms, risk is the term always used.

Risk is always sought to be quantified (in that an (usually tbh subjective!) assessment of Probability of the event occuring is made).

The probability of occurence is minimised by specific actions (e.g. proto-typing).

And the effect on the event occuring is mitigated (reduced) by pre-event actions (e.g. containment dome around fission reactors).

As for applicability to finance, well, I minimise the risks to me own 10-bob by keeping it in a building society rather than a bank (societies have to, by law, be able to cover (I think) 95% of their liabailities) and have a mortgage with a building society for the same reason.

{Always a repayment mortgage cos I never believed - or if you like, was prepared to take the subjective (and to me unbelievable) risk - that endowment mortgages would deliver. Now there's a nice spin off we could talk about...mass-greed of endowment mortgage "buyers"! And as for the so-called "mis-selling"...pah!, people knew exactly what they were buying and then have the downright audacity to blame others when their plans didn't deliver. Talk about not taking personal responsibility!!! }

Diversification seeks to mitigate complete or catastrophic loss by selecting what the investor reckons to be statistically independent sectors or companies. I'm not sure that diversification is always an indicator of ignorance though CL (although I see where you're coming from) - but no matter how well you know or have researched a particular market/sector/company there's always a probability of an event which could not be forseen (e.g. an Enron or Maxwell type internal well covered up fraud)

Anyway, if I don't go and get me dinner now there's a risk that it'll have gone cold and I'll have no chance of persauding Mrs Stick to let me go to Bofra relays at Malham tomorrow!Probably.

[Bladerunner]

Stick, a couple of things..doesn't matter who your mortgage is with...infact you want your mortgage provider to go bust

Secondly building societies are just as vulnerable if not more so than banks as thier main market is residential mortgages and thats where all the carnage is going to be...hence Northern Rock and B&B going bust due in a large part to buy to let mortgages.

[XRunner]

Northern Rock and B&B going bust due in a large part to buy to let mortgages.

It was the source of their funds that caused their problems, not their mortgages.

[Stick]

Stick, a couple of things..doesn't matter who your mortgage is with...infact you want your mortgage provider to go bust

Secondly building societies are just as vulnerable if not more so than banks as thier main market is residential mortgages and thats where all the carnage is going to be...hence Northern Rock and B&B going bust due in a large part to buy to let mortgages.

Yeah, but the problem with one's mortgage provider going bust is that somehow we (you and me and Joe public) are never the benficiaries are we...! (The Receiver or Administrator sells our debt on to someone else for a pittance and they make a fortune making sure we still pay up!)

I disagree about the BS's being as vulnerable as banks though. Their gearing has to be very low and, by law, their assets have to (just about) cover their liabilities. They lend mortgages on the basis of - and with the funds from - their "income" (their savers funding them) and not the national or international financial money markets.

And the cases you cite (Northern Rock and Brad &Bingley) are banks, not building societies That was their mistake and source of downfall. But of course everyone (including BS account holders) thought they were on a free ride...

Anyway, we'll all be the losers one way or the other. Mind, it'd be nice (...he said as he has a base rate tracker mortgage ) if UK interest rates do come down next week wouldn't it! (...he said waiting for the flurry of posts on recession and inflation )

[Rodders rambler]

Now there's a nice spin off we could talk about...mass-greed of endowment mortgage "buyers"! And as for the so-called "mis-selling"...pah!, people knew exactly what they were buying and then have the downright audacity to blame others when their plans didn't deliver.

I stand to be corrected but i think some of the early endowment mortgages were sold with guaranteed returns.These were soon stopped as they were unrealistic.You can't blame anybody but the sellers in that case.

[Bladerunner]

X Runner 'it was the source of their funds that was the problem not the buy to let market'...

I made the point about their funding in an earlier post...it was through the interbank market. The reason their funding dried up before anyone elses is that the other banks were ultra wary of lending to them because they had a massive exposure to buy to let, the most risky part of the market.