THE GLOBAL FINANCIAL CRISIS......DID WE LEARN OUR LESSONS? HAS THERE BEEN CHANGES? WHAT DO YOU THINK?!

[rockits]

I met an American trainer at a 3CX training/certification course recently. Had a great chat about many things but the one main thing we shared many views on was the Financial Sector/Industry. He sent me a couple of links to watch. I have watched the 1st and will watch the 2nd when I can.....maybe on the bike on Saturday night!

Due to one crisis after another sweeping much of this under the carpet and now Brexit. Did we ever address the fundamental issues that created the global financial crisis in 2007-2008 in the first place. Shock.....yes.....over 10 years ago! I don't think we have learnt our lessons and many of the fundamental issues still exist. I am not in the financial sector professionally so do not know what lessons we have learned and what changes have been made.

I would love to hear lots of views and opinions especially from those working professionally in the financial sector.

It concerns me that lessons haven't been learnt and changes have not been made. How long are we away from the next pending global financial crisis? Surely they will get bigger and worse if changes haven't been made. There is only so long you can sweep stuff under the carpet or keep burrying stuff underground before it becomes a truly outragelously massive issue does it not?

 

[GeoffCapes]

Here's a little tit bit which is not generally known nor recognised.

The sub prime crisis, started in London.

AIG Financial Services (or whatever it was called back then) invented the idea of packaging **** loans in with good ones, and then reselling them.
They made so much money doing this, it was almost criminal (the irony) so the big wigs at AIG suggested reinvesting it elsewhere to not raise suspicions of wrong doing (which at the time it was perfectly legal). So they ploughed the profits into aeroplane leasing. AIG became the largest aeroplane lease company in the world (worth billions). Still is I believe.

This was made possible by Gordon Brown not regulating the banking sector like he was supposed to.

AIGFS, was then managed by a bright spark who figured that he could increase his bonuses by selling this idea to his US colleagues. So he did.
Then the whole of the US market saw it as a way of making massive profits and huge bonuses.
AIGFS saw that they could be in a right pickle so sold all of their sub-prime loan positions in the UK and let someone else carry the can.

The rest as they say is history. Except that the US arm of AIG FS didn't sell out.

I got all of this information when I worked for AIG, from a friend at the time who worked for AIGFS in Mayfair.
Sadly was killed in a car accident in 2011. Just as AIG were sorting their mess out and had to be bailed out by the US government.

 

[Ewan]

Some things have changed. Banks have to hold greater cash reserves, and mortgages are more tightly regulated (with less self-certification). But as a society we still borrow too much, meaning it doesn't take much to upset the apple cart.

 

[Chrisb2015]

I met an American trainer at a 3CX training/certification course recently. Had a great chat about many things but the one main thing we shared many views on was the Financial Sector/Industry. He sent me a couple of links to watch. I have watched the 1st and will watch the 2nd when I can.....maybe on the bike on Saturday night!

Due to one crisis after another sweeping much of this under the carpet and now Brexit. Did we ever address the fundamental issues that created the global financial crisis in 2007-2008 in the first place. Shock.....yes.....over 10 years ago! I don't think we have learnt our lessons and many of the fundamental issues still exist. I am not in the financial sector professionally so so not know what lessons we have learned and what changes have been made.

I would love to hear lots of views and opinions especially from those working professionally in the financial sector.

It concerns me that lessons haven't been learnt and changes have not been made. How long are we away from the next pending global financial crisis? Surely they will get bigger and worse if changes haven't been made. There is only so long you can sweep stuff under the carpet or keep burrying stuff underground before it becomes a truly outragelously massive issue does it not?

This is a massive subject. I work alongside the banking aspect of the financial services industry so have many conversations, official and casual with people in many roles and there have been changes. Some of that has come through regulation, other self imposed due to PR and shareholder pressures. I have personally witnessed some positive cultural change but am realistic about the conflict they/we have. Being public all listed banks exist to make a profit with shareholders and compensation plans that reward success. Wherever you have this, you will find poor behaviour and pockets of potentially criminal activity, although I don’t know of any bank that is currently as rotten as RBS once was. I can’t comment on the wider industry with any qualified view other than to say like most people, I am far from certain that another big crash isn’t around the corner. The amount of private debt is incredible and I struggle to see how it would be sustainable with even modest medium term changes in overall economic prosperity.

 

[rockits]

Interesting stuff indeed. I agree there is a pending crash it is just a question of when. Unless things suddenly chnage massively. I don't see many people able to find another £500 or £1k per month is suddenly their mortgages increased. If they are living beyond their means now then they have zero savings, zero buffer and don't know what an essential/luxury actually is.

I personally think the crash especially in the UK....especially in the South East wasn't hard enough. We just didn't experience enough hard ship to understand the severity or why it happenend in the first place. I have always saved, have a buffer and am ready to with stand some pain. This wasn't by luck but by design. I fear many have not done this though and just spent their earnings and more. I dare say they 'enjoy' their day to day life more because of this but time will tell if this was fool hardy.

I know some things have changed but it has not been hard or fast enough. See the pattern here! Seems like most changes are simply not hard or fast enogh across the board. Plastic waste and the generation of new plastic waste is ridiculous. We just aren't doing enough quick enough.

I will work my preverbials off for another few years to 50yo then hopefully I won't owe anyone anything to anyone and will be sitting in an OK place. Strange times.

 

[Chrisb2015]

It’s tempting to say things like it wasn’t hard or brutal enough for people to get the message and i see the point but the the consequeances of what you are saying is a large swathe of the population sinking into financial oblivion. We already have the real probability of a lost generation, we really don’t need this compounded. A family member used to say what we need is a good dose of inflation to wipe out debt. I am not sure if this sort of old economic thinking works in the modern connected world economy as it once did.

As for the plastic thing don’t despair. I recently watched a fantastic interview with Al Gore and he said something along the lines of “change happens much slower than you would like then happens quicker than you thought possible”

Other notible causes have felt and seen this trend. Keep believing, we are getting there. .........

 

[rockits]

I get your point but sometimes the only way to learn is for people to experience hard ship first hand. The soft touch doesn't seem to be working.

It needs to get worse before it can get better. Harsh but better in the long run. It is like our weight loss thread. The changes need to be long lasting not just small initial immediate gains.

Bottled Water Facts | Ban the Bottle

Why is bottled water a concern? Here are just a few reasons... Making bottles to meet America's demand for bottled water uses more than 17 million barrels

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We're Now At A Million Plastic Bottles Per Minute - 91% Of Which Are Not Recycled

Every person reading this has used a plastic bottle, many of whom likely used one in the past day or week. Plastic, in the recent decades, has become a staple of convenience and a modern lifestyle.

www.google.com

https://www.google.com/url?sa=t&sou...FjALegQIBBAB&usg=AOvVaw2AHvvC4FgkmPs9ln6dJtll

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The numbers are getting quite staggering.

The propensity and desire for increased growth to resolve and mask the fundamental issues we know exist is misguided IMHO. Let's just fix the issues not try to spend or grow our way out of it. It just doesn't make sense to me.

Why do we need to keeping growing?

Why can't we find a nice happy medium of sustainability and be content with this?

Where did this fascination with growth come from and why do we keep beating this growth drum?

 

[Chrisb2015]

Ambition and appetitie for growth and more explains in part why we have moved beyond dwelling in caves. To stop this desire is as impossible as stopping our natural desire to pro create.

 

[Wattie]

Huge subject but nope, nothing has been solved.
In fact global debt is at all time highs.

World economy at risk of another financial crash, says IMF

Debt is above 2008 level and failure to reform banking system could trigger crisis

www.theguardian.com

Central Bankers papered over the cracks with vast amounts of QE and intervened by moving the goalposts, banning short selling of those in trouble, allowing banks not to mark to market their bad debts, recalibrating how certain things are calculated gdp - this is a belter to adhere to EU rules!!

Accounting for drugs and prostitution to help push UK economy up by £65bn

A more inclusive approach to GDP comes into force in September to comply with EU rules on measuring the economy

www.theguardian.com

GDP not looking good, mmmn, let’s guess how many blow jobs and lines were done last week and add them to our figures. That’ll fix it!

Global QE has caused massive asset bubbles in certain things...markets, property. Signs are there it’s beginning to burst in some places.
We have stealth inflation too...... noticed how chocolate bars for example are getting smaller but the price remains the same?

Nothing that should have failed was allowed to fail so all that bad stuff is still out there but bigger...non performing loans on bank books are massive.

Global Markets are now broken and are totally reliant on central bank policy/manipulation. Markets are “hooked” on the free money and as a result central banks are propping everything up...LTRO in Europe, Bank of Japan buying its own bonds.

Bank of Japan's balance sheet now larger than country's GDP

(Reuters) - Japan's central bank has become the first among G7 nations to own assets collectively worth more than the country's entire economy, following a half-decade spending spree designed to accelerate weak price growth.

www.reuters.com

It’s all become a Ponzi scheme.

The US economy is in such a strong position it cannot handle a 0.25% rise in rates. what?? Look what happened around Xmas when the Fed said it was going to continue to unwind it’s qe. Market tanked! Powell called in to see Trump, next day statement saying we’ll be more accommodative....markets rose and have continued to do so as they now expect more QE not unwinding!
Bad news has become good news for markets!

Bond market showing warning signs too, yield curve inversions are flashing red warning signs.

Nope I don’t believe anything has been solved....I think the next crisis will be far far worse than the last one.

 

[outrun]

GDP not looking good, mmmn, let’s guess how many blow jobs and lines were done last week and add them to our figures. That’ll fix the figure!

Brilliant Wattie, love it.

 

[Wattie]

Brilliant Wattie, love it.

Yup the more hookers and drug addicts your country has the more it benefits your GDP,! Isn’t it good to know the positive contribution they make
It’s that incredible you couldn’t have made it up!!!

 

[Scaf]

I do not pretend to be the brightest spark in the box. But my view is that whilst we may have learnt something, we just move the problem somewhere else.
Last time it was subprime mortgages- this time it will be vehicle leasing or something- people who would be driving a 5year old Mondeo are now driving brand new BMW’s and most likely have huge credit card debt.
I owe nothing - own somethings - gamble (in business) the rest.

 

[GeoffCapes]

I do not pretend to be the brightest spark in the box. But my view is that whilst we may have learnt something, we just move the problem somewhere else.
Last time it was subprime mortgages- this time it will be vehicle leasing or something- people who would be driving a 5year old Mondeo are now driving brand new BMW’s and most likely have huge credit card debt.
I owe nothing - own somethings - gamble (in business) the rest.

This is why I’ve never understood car finance.
You never own the car. You pay out monthly for the car. Have to find a deposit at the start of a new finance deal which is the cost of a half decent car.
For what? A brand new car that you don’t own.

Where I live this is obviously very popular. There’s a house round the corner from us where the house is worth 250k and they have a brand new Range Rover outside. Which is what? 100k?

The finance must be huge!

 

[Wattie]

I do not pretend to be the brightest spark in the box. But my view is that whilst we may have learnt something, we just move the problem somewhere else.
Last time it was subprime mortgages- this time it will be vehicle leasing or something- people who would be driving a 5year old Mondeo are now driving brand new BMW’s and most likely have huge credit card debt.
I owe nothing - own somethings - gamble (in business) the rest.

Bang on the money...cars

Zerohedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

student debt

Zerohedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

 

[Wattie]

Interesting stuff indeed. I agree there is a pending crash it is just a question of when. Unless things suddenly chnage massively. I don't see many people able to find another £500 or £1k per month is suddenly their mortgages increased. If they are living beyond their means now then they have zero savings, zero buffer and don't know what an essential/luxury actually is.

This, i've never been more acutely aware of people living at or close to their limits as I am now.
Massive bubbles here in Oz/Nz...property and its all heading south.
It doesnt bode well.

 

[rockits]

The ironic thing is many people already know this. I used to have a Director/Partner a couple of years back for a couple of years. At all other times I've enjoyed my own company.

His view was in essence to drive with your eyes wide open at high speed heading for a brick wall. He didn't feel the need to brake or slow down and just felt that cashflow could be fed from new business. Don't save or keep a buffer for some lean times. What happens when the new business slows or doesn't come? Yup.....you hit that brick wall with your eyes wide open at high speed. Funnily enough that is exactly what happened.

It nearly took me down but silly old sensible me luckily dealt with the issue before it become too late and too catastrophic to deal with. Call me old fashioned but I didn't fancy hitting that wall at high speed that I could see coming. I slowed down, stopped and backed up for a bit and the wall wasn't hit.

I have no idea why you would want to carry on at high speed driving at that wall that you know is coming. We are only doing the exact some thing. Just with some allegedly clever traction control or radar collision avoidance technology. You know what......sometimes the tech fails!

It is a high risk strategy with potentially catastrophic results. Then it always seems to be the most vulnerable that end up paying the orice the most. It stinks and it is indefensibly wrong.

 

[Chrisb2015]

This is why I’ve never understood car finance.
You never own the car. You pay out monthly for the car. Have to find a deposit at the start of a new finance deal which is the cost of a half decent car.
For what? A brand new car that you don’t own.

Where I live this is obviously very popular. There’s a house round the corner from us where the house is worth 250k and they have a brand new Range Rover outside. Which is what? 100k?

The finance must be huge!

I am in your camp historically but I am beginning to see the other side. A friend said to me the other day....”why would I want to own it? I am paying for the use of it that’s all. At a price each month I think acceptable based on what the vehicle is with the security I hand it back at an agreed date for a specific value”. So now I am thinking why not? It’s probably just a mind shift needed. I see big business moving towards consumption based economics every day. For those familiar with AWS (Amazon Web Services) there is no greater example of this trend.

 

[rockits]

I understand and appreciate both sides about car buying and leasing. I can so why both do it the way that they do it. Especially for daily drivers or work vehicles to be leased. But is just a chunk of metal and a tool to get you to and from work or customers. It makes sense to lease/rent these.

The one thing I don't trust often is the sometimes underhanded tactics to extract more cash out of you at start and finish of deals. Also that you are tied in for fixed terms.

I like the flexibility I can buy and sell when I want if things change. Also to buy a 2nd hand vehicle and run it still is the cheapest way often to buy/run a car.

I have just bought a work Mitsubishi Outlander PHEV Commercial and bought it cash. I considering leasing it but it made more sense to buy and run for as long as I want. We get 100% VAT and tax relief against it day one that we wouldn't through leasing. Each situation is different I guess.

 

[Wattie]

Fed now sees no more interest rate rises in 2019...... one in 2020
Strong economy indeed.
More QE next to maintain the illusion all is well is the next step along with interest rate cuts.

 

[Phil H]

I do not pretend to be the brightest spark in the box. But my view is that whilst we may have learnt something, we just move the problem somewhere else.
Last time it was subprime mortgages- this time it will be vehicle leasing or something- people who would be driving a 5year old Mondeo are now driving brand new BMW’s and most likely have huge credit card debt.
I owe nothing - own somethings - gamble (in business) the rest.

There is a new storm brewing that embraces the ills of sub-prime housing and car leasing; it's the leasing of new build houses by mainstream builders who convinced their buyers they were getting a good deal, and the lawyers already smell blood. Meanwhile housebuilding bosses trouser their mega bonuses and they will no doubt depart (via a revolving door) 'for the good of their companies' and leave others to pick up the pieces.

As for the great god 'Lessons Learned' just how many Carillions, Interserves, and BHS's do we need before regulators earn their keep? ****'s teeth, even the auditors now face investigation.

Still, we do have the NAO which now reports that the cash-strapped BBC is trying to regain control of a project to refurbish the Eastenders set. It's now 'on track' to be only 5 years late, and it's currently just £30m over the original £56m budget (with 4 years to go), so that's ok then.

Jeez, I'm grumpy these days, must be my age!

PH