Just a little question. It’s about all this bad debt and losses claimed by the banks.

Where are they ?

Impossibly large figures of losses are being mentioned. This morning BBC Radio Four news, interviewing Chancellor Alistair Darling about the billions of pounds being supplied by the Government to the Royal Bank of Scotland to stop it going bankrupt, mentioned how all these gigantic bank losses around the World appeared since American bank Lehman Bros became bankrupt with huge losses of it’s own just a few months ago.

The UK and American governments talk about trillions of pounds of support to the banking system because of bad debt reported by the banks. Other Governments around the entire World are also dealing with economic meltdown in every country as banks generate bigger and bigger losses by the day.

So, exactly where are all these bad debts the banks are talking about ?

Did every sub-prime mortgage holder and senior business executive mysteriously conspire to suddenly stop paying back their loans to the banks because Lehman Bros went bust ? We are all told these trillions of pounds of losses have appeared as a result of the banking system becoming rotten because Lemans were ‘allowed’ to go bust.

How did this event stop factories making things, shops selling them and workers being employed and spending their wages ? Or putting it another way; seeing as how the Global economy was prospering, with trade expanding and more jobs produced as increasing amounts of real wealth were being created, how was all this real wealth of frenetic trade and economic activity suddenly destroyed ? Who did destroy it all ? What destroyed it ? Who or what really wrecked the World economy and forced businesses to go bust, people lose their homes and jobs and poverty spread rapidly everywhere like a disease.

It wasn’t the factories and other businesses, madly busy trying to meet rising demand for more and more products. It wasn’t the busy little workers beavering away being paid to work long hours busily doing useful things.

Everyone still wanted to make things to sell to other people, to have jobs and be paid, and mortgage holders of any kind were always pretty keen to pay their mortgages using those wages from their jobs.

So, if the business owners and their workers – the people who actually create real wealth – wanted to carry on creating real wealth, how were they stopped from doing the very thing they wanted to continue to do most of all ?

And those mortgage holders, initially blamed by the banks for being the cause of all the problems; didn’t all of them want to carry on paying their mortgages so they could stay in their homes and not be thrown out onto the street as homeless vagrants ?

I expect they did, don’t you ? I expect all those businesses really wanted to carry on employing people and prospering because there is always, but always, an insatiable and completely unlimited demand by the human population as a whole, for more and more gizmos and artifacts; better food, less poverty, more homes for the billions of homeless, more medical care – in fact just more of everything so as to improve and advance human civilisation.

But an apparently invisible force has now appeared, stopping all these hard working wealth creating businesses and workers from functioning. Many are forced into poverty, bankruptcy, foreclosure, homelessness, suicide and hopelessness; all because they are being forcibly prevented from working to create that wealth they crave to produce for themselves and the rest of humanity.

I wonder what that invisible force is ?

Humans, being the sort of restless creatures they are, fear idleness above all else. They must always be doing something; and the first thing to do is provide the material comforts of a home, enough food and clothing and medical care. There is still a long way to go before every member of the human race achieves those goals. So a lot of work still to do for everyone. That’s a lot of economic activity to be busy with for a long time into the future. Plenty to keep us all busy for a very long time then !

Now all these frantically busy people making all the real wealth appear from their labours, might have borrowed money from the banks to enable them to work harder, expand trade faster and generally oil the wheels of commerce. After all, it is money which is essential for trade to exist beyond the crude stage of stone age bartering of goods.

But, in those halcyon days before Lehman Bros investment bank collapsed (that’s just a few months ago, to remind you again) all these businesses and mortgage holders were happily paying their loans to the banks and there were not trillions of pounds worth of bad debt swilling around caused by hordes of people refusing or unwilling or unable to pay their loans back to the banks, making them all go bankrupt.

So all this unmanageable debt was not created by business and mortgage holders then. They wanted to pay their loans back and they were doing exactly that.

So where, precisely, did all this bad debt come from ? It wasn’t all there before Lehmans went bust, or before a couple of years ago. All the debt around then was ‘good’ debt, being paid back to the banks that loaned the money in the first place. How was it suddenly created ? Who created all this bad debt ?

Could someone just answer this question ?


Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , ,


  1. Ronald Curt Says:

    As you point out, the invisible force is all the speculative transactions that some rich people benefit from, and speculation increaced prices without good reason making all in trouble

  2. Loans Says:

    Nice info! Very cool post.I have looked over your blog a few times and I love it.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: