Laurence White: Will we have any cash left after world market crash?
The financial turmoil currently gripping the world is of such a magnitude that it is over-shadowing what until a couple of months ago was the biggest story in town — the race for the White House. Now Barack Obama and John McCain find themselves a side-show.
Who will be the most powerful man in the world? No one really cares. The only thing that concerns people nowadays is will they still have any money left when this crisis has run its course?
Obama cannot give them an answer. Neither can McCain. No one can, because no one has ever been down this road before. Iceland has nearly gone bust. Imagine that, a well developed economy heading towards the wall, and now dependent to some extent on Russia to help bail it out.
In America the Bush administration’s huge financial life-belt to the banking sector has gone down like a lead balloon with the voters. They don’t care that it could help secure their future. In the land of free enterprise, they are rightly angry that the capitalists who ran their banking system made such a mess of it.
Their ire will not have been cooled by the news that the world’s largest insurance company, AIG, spent $440,000 entertaining freelance insurance salesmen at a top Californian beach resort only a few days after getting an emergency loan of $85bn from the US government to stave off bankruptcy.
At least the American voters, if only by proxy, get to vent their anger at the bankers who ran their financial system. The head of Lehman’s Brothers bank, Richard Fuld, got a right kicking from a Congressional hearing into the failure of the bank. He took home, by his count $300m, higher by other estimates, in pay and bonuses over the past eight years and then oversaw the bank go bust. The price of failure doesn’t get much better!
It would be nice to get our bankers into the dock, politically speaking, and get them to explain just how they got things so desperately wrong. Every taxpayer in the UK is seeing £2,000 of their money given away by the government to shore up the banking system. Of course it needs to be done and of course it is in our best long term interests, but is there no way we can beat up the bankers at the same time for getting us into this horrible mess?
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And it is a horrible mess. The construction industry is grinding to a halt. Everyone I know in the industry is now desperate for any work. Indeed, if you have any money and need home improvements, now is the time to get them. Construction workers will cut each other’s throat for a job, any job at any price.
House sales are fast becoming a memory. A friend recently wanted to find out the average price of a certain type of property in west Belfast and phoned around every estate agent he could think of who operated in the area. He was able to find one house sale of the type he required in the past 12 months — and that in an area where house sales are traditionally strong.
Home prices have slumped. Recently a property originally on the market for £750,000 was re-advertised for £500,000. Home loans are hard to come by and are more expensive. New car sales are down by 30% in Northern Ireland, a province that loves its cars.
The only good news is that now is the time to pick up a bargain. First time buyers can get a cheap home and everyone can pick up a cheap car. If the dealer won’t bargain, walk away. He will come running after you.
It is even possible to hire a tradesman. None of them are too busy now or even too expensive.
The problem is that no one is quite sure if they will have any money in the future to pay for these bargains.