Skip to main content

The Crisis of Credit Visualised

The 2008 financial crisis is about to celebrate its 3rd anniversary and we are nowhere clear from it.

News reports are appearing that US regulators are suing banks for billions for the crisis.

Wrote The Slate,

The lawsuits came through. Late in the day Friday, the Federal Housing Finance Agency sued Bank of America, Citigroup, JPMorgan Chase, and Barclays. The federal regulator also listed Nomura Holdings, HSBC Holdings and Credit Suisse Group as defendants, reports Bloomberg. The suit relates to losses on more than $41 billion in subprime mortgage securities that were sold to Fannie Mae and Freddie Mac.

Many of us may not understand how this crisis began and we are looking at signs that it could happen again, especially with rising property prices in Asia. Below are two set of videos I found that helps explain the crisis of credit.

There are lessons to learn here. Property prices, especially in Singapore, where it is always expected to rise and never fall, is facing a bubble.

I believe the bubble will burst once QE3 is approve. QE3, or quantitative easing by the US, will increase the quantity of USD in the market. This will result in drop in the value of USD and might come on par between the Singapore dollar or even lower.

If this happens, inflation will sky rocket as there will be too much money chasing limited supply of goods. MAS would have no choice but to raise interest rates to curb inflation.

If interest rates do not increase, there could be run on banks as more money is needed to buy for goods and it doesn’t make sense to keep the money in the bank as your saving value decrease day by day.

Interest rates going up means you have to pay more for your housing loans and if you can’t afford to make monthly payments, you default. Default means the banks own the house, not an ideal situation for the banks either. With more supply than demand, property prices will tank.

Why will defaults on loans increase? Very simple. With the depreciating dollar, Singapore exports will also be expensive. When it comes to exports, it is not just goods but services employed by US MNCs.

Retrenchment of white collar workers would be expected, in turn they can’t pay their loans and are forced to sell their property.

This is explained very well in the the two videos.

The intention isn’t to scare you but to help you make a better decision in whether you should buy that property today.

Labels:

Comments

Post a Comment

Popular posts from this blog

Singapore radio personality in "hot soup" for reporting train delays based on Tweets?

Update - Hossan Leong has commented on this post to say " I'm not in trouble pls don't blow this out of proportion. Let it rest. It's getting silly. Thank you for your love and concern and I apologize for any misunderstanding." ~  Hossan Leong. Hossan Leong, a Singapore radio personality for The Gold Breakfast Show on Gold 90.5, was censured today for reporting on train delays on the Circle Line because he based the information on Tweets, rather than waiting for the official reports from the Circle Line operator, SMRT.  It is, however, unknown if the "warning" came from Mediacorp producers or SMRT. Tweeted Hossan Leong ,  OK...I reported it on air and now I'm getting into trouble for it?? The CC line is DOWN rite? I did nothing wrong rite? The SMRT Circle Line was reported to be down this morning during peak hours and started as early as 7am. However, local news only received official statement was received by the mainstream media at about 9...
14 comments
Read more

DBS Bank – One Tweet too little too late.

(Updated post - DBS apologise with the 3Rs – Will social media bite? ) It was the bluest Monday for DBS/POS Bank in its entire banking history when more than 1000 of their ATM and online banking services were taken offline due to a software upgrade an outage (PR announced that it was down due to software upgrade, but the outsourcer, IBM, later claimed it was an outage). So on that Monday, DBS decided to sign up onto Twitter and post a 140 characters one-liner onto Twitter to post a one liner to inform the Twitterverse of the down time. Everybody knows that if you just create a new account on Twitter, you would start off with 0 friends. How would you be able to inform the Twitterverse if you start with 0 friends? DBS Bank did something smart to insert the #dbs and #posb and that probably drew some attention to this account. However, the effectiveness of the tweet was lacking as it drew only 28 retweets. As of this posting, DBS Bank attracted 274 followers. A letter to T...
9 comments
Read more

New field in SocialPR: Social Media Crisis Communications

I have been busy with family for the Lunar New Year week but it seem the Singapore blog-o-sphere was active, and is still is, about recently formed Association of Bloggers (Singapore), ABS for short. To cut a long story short, the announcement of ABS via mainstream media didn’t go down well with Singapore bloggers and in the end resulted in some speculation to why ABS was set-up in the first place. A post by the ABS president defending herself against a harsh criticism from a blogger added to the bad start and created even more speculation that ABS was set-up with an ulterior motive. A week later, some founding members of the pro-team started posting up notice of resignation on their blogs and this just added fuel to fire. Again, a story of ABS appeared in mainstream media and this lead to even more disgruntled bloggers asking why the president isn’t responding via her blog or the association’s blog. I also responded to a post about the ABS incident. You can catch a summary of...
6 comments
Read more