Boom and Bust

Good morning,
the current financial situation of the country; with lenders, banks and insurers falling under the curse of the “credit crunch” is a sorry state of affairs. It would be a bad enough situation if it was limited to our country, but the repercussions are felt all over the world as ridiculously huge numbers are lost on the stock markets of the world.

There is the question of “why is this happening?”. Some point the blame at those who lent the money to people in situations that did not facilitate repayment. Some point the finger at the people who sought to borrow the money, knowing that they were in a situation where they may not be able to make repayments. Some point the finger at God for creating such a sequence of events that means we find ourselves where we are today.

The way much of the financial sector works, banks and insurance; it is based on gambling. They call it “investing” but there is little difference between that which the banks do and we do when we pay a visit to Vegas.

When a bank invests in the markets, it is expecting a return based on the performance of those shares it holds. If a share does well, they can either hold onto the share and receive money sent to shareholders; or they can sell it at a profit. If a share does poorly, they can hold onto it and hope it will increase in value, or they can sell it at a loss.

Although there is more structure to it than us shooting craps, or betting on red or black at the roulette table; essentially they are doing the same thing. They are gambling. When everyone makes more wins than losses, everyone is happy. Money comes in for “nothing”

When people make more losses than wins, then we have problems. With industries being hit by the economic downturn, few people are posting profits of the sort we would have seen a few years ago; this in turn affects the stock price, meaning it drops as no-one wants to hold shares of an unprofitable company.

Just lately people have been making more losses than wins. There is “less money available” – or rather a feeling of less money available. Lenders increase the percentages they charge on loans to help raise money – but this just leads to people being unable to make payments; they default on the property – become homeless and the property goes to the lender. In prosperous times, this isn’t a problem for the lender. They can auction the property and will receive the money they loaned back (if not more if the property makes more than the amount originally loaned). In the current climate though, people do not have money. People cannot get money. The lenders are left with empty properties that generate no revenue, and in fact need maintenace and taking care of. At the same time, other banks are calling in loans from banks and lenders … we create a domino effect.

Already we’ve had reposessions and people becoming homeless increase terrible amounts. We’ve had the start of many banks and businesses fold. Only the largest, or government supported, will survive.

My thought for today is to make the most of what we have. To live within our means. To not become complacent, to not become greedy. Our lives are filled with luxuries we don’t need, but we’ve come to think of as being essential. When it comes to providing a place to live for ourselves, we need to not stretch ourselves too far. If we can’t afford something, we should accept that and make do with what we can afford; in time, if we work hard, we may find we can afford that which is currently out of reach.

In these hard times we need to take care of each other. Love thy neighbor. Treat others as we would want to be treated. Be charitable. Help those who are less fortunate than ourselves, even if only a couple of weeks ago the roles were reversed and they were more fortunate than us.

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