I've looked at the exchange rate today, and the currency is UK is really dying. When I first started my job last September, the exchange rate was 1:6, but today it's 1:5.36... What the fuck....
The Bank of England is really cutting a hell lot of interest rate. From 5% to 3.5% and still dropping. This is the lowest interest rate in the recent 20 years.... This is bad news for me.... Banks such as Northern Rock needed the government to bail them out last year. At the moment, even UK's 2nd largest bank (Royal Bank of Scotland) is at the brink of nationalising, what do you think about the smaller banks? Bradford and Bingley and Halifax will just follow Northern Rock's footstep.... Sigh....
Anyway, in the high street, Christmas decoration are up for sale days before Halloween. Yes, shops are selling christmas stuff days before Halloween. What the Fuck!!! I think, this is an act of desperation.... They were desperate for CASH... They wanted to sell the remaining stocks and also their warehouse, just so that they can return the money they borrowed.... Especially those that borrowed from Icelandic Bank.... Haha... The British are really feeling the squeeze of the Credit Crunch...!!!
As for me, my job is still secured. Simply because I'm a bridge engineer. I'm involved in government projects. Of course some of the government projects got cancelled, but it is safer than working in Buildings.... The projects that I tend to do are mainly maintenance work/ refurbishment and inspections of bridges. The local governments won't be building new bridges, but they have to maintain and inspect them routinely. So, I guess my job is relatively secured. Phew... But if I got axed, my company will have to compensate me one and a half year's of salary.... So please... axe me now!!!! Haha....
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Just to let you guys get a feel of how bad the economy here is. I went to a clubs and pubs last week, and there's less than 20 person in every pub. There's one which is empty... Haha... Everyone is saving money for christmas, I guess.
ReplyDeleteMy lecturer told me that UK's economy have dropped much.So malaysia's economy is followed.Emm...i think we have our responsibilty to solve it through saving, lecturer teached.haha...i wanna to know why recession will happened in UK?and why the largest bank will closed?
ReplyDeleteThe whole recession started in US and you'll need to understand what is subprime loss.
ReplyDeleteIf you wanna buy a house, you'll have to borrow money from Bank A. Bank A knows that you are unable to pay back the loan, but the bank still lends you the money. Bank A then sells your mortgage to Bank B. Bank A will be earning money without any risk because the mortgage is now between you and Bank B and you still pay the same amount of to Bank B every month. Bare in mind that the house prices were going up in US at that time.
US government then has to control inflation by increasing the interest rate. Imagine this, what if Bank A can't sell the mortgage to Bank B or any other banks, and you're unable to pay back the money. So the Bank A will make a loss. Multiply this by millions of customers, then the bank will collapse.
London is the biggest financial market in the world and a lot of UK banks lend and invest in US. Now that Bank B knows that Bank A is in big trouble, Bank B refuses to lend Bank A money. So, this makes things worse.
Basically, saving money= lending money to banks, except that the government will guarantee it lar. So ideally, saving money is will save the economy.
Any question, just let me know. I'll try and explain it to you as much as I can. But I don't really know the details, cause I never study finance or economics. Hehe.... :D
the situation now is banks don't trust each other, because no one know who has the most bad debts.. so they dare not approve any inter-bank loans or loan to consumer, in case the counterpart can't repay the loan.. (
ReplyDeleteif you recall the child time card game "donkey" or "old macDonald")
there is this thing called money multiplier, which basically means when the bank make a loan, the money base increases. imagine when you deposited $100 in the bank, the bank lend out $80 to its customer, the total money increases by $80... when the bank stop making loans... the money base shrinks... and when all the banks stop making loans, the credit market to fail!!
also there are some who says this is a moral hazzard issue, involving bankers from big us banks (goldman sachs, bank of america, lehman brothers) and henry paulson US treasury secetary who once work for Goldman Sachs...
they knew this is coming years ago... and yet they all draw hundred millions of dollars of bonuses each year... now the US has to bail them out with hundred billions....
ooo...i understand...some of yr explanation are same as my economic lecturer said.that's why m'sia will get influenced by. thanks ya...yr explanation helps me a lot.then, do u expect that recession there will be more worst in the future?
ReplyDeleteFirst of all, I don't know for sure what will happen in the future... Hehe...
ReplyDeleteBut since the economy in UK is quite dependent on the financial market, the economy here will be going down for the coming five years.
Bare in mind that things will get better after 2012, cause of the Olympic games. But I don't think it's enough to cover the losses. The government could only boost the economy by cutting interest rate and building more infrastructure such as high speed rail, power station and water treatment plants to stimulate growth. But where will the government get the money from, if the ppl here are short of cash???
What GC said is right. The current financial sector here is "CASH IS KING". Which bank has cash, that bank will potentially be the biggest player and winner in the market.
What do you think GC??
Ivy, you could probably ask your coursemates to post some comments and have a little discussion. It'll be beneficial to your studies. :D
oh i see...it is suffer for all the workers there because have to worried about their job...haha...my coursemates do not blogging one...my family problem is ok alrdy...but i know it is temporary only...but nvm...u can sms me n chat v me when free...my no. is 016-6216288
ReplyDelete