Now you know why bankers are so secretive. It’s because they haven’t got a clue, and that's something they very much want kept secret.
Up to some point in the last couple of weeks you could borrow as much as you wanted on the most relaxed of terms, after that point you couldn’t borrow a penny except on the strictest terms.
Nothing fundamental happened to the world economy which was steaming away for 4.9 per cent GDP growth this year according to the IMF.
But a foolish flock of financiers collectively changed their attitude to risk from Green to Red.
That caused the credit crunch which has so far been bankers refusing to lend to other bankers, with creditor bankers trying to get their money back from debtor bankers.
The stock market crash resulted from the indebted guys raising cash to keep their creditors at bay. It’s just the same as a grand old family falling on hard times.
First they sell the shares, then the paintings, after that the silverware and the furniture, finally the land, and then the house.
But does the fall in share prices reflect badly on the current profitability of companies? No.
The worrying unkown for bankers is who's hopelessly indebted and who's not? No one knows. Some guys out there are bust, but they're not saying.
Only when distress sales of heavily discounted assets occurr will we find out who the bust guys are. Vulture funds to take advantage of those sales are already being built up.
Meanwhile US lawyers are advertising for investors in debt-stricken funds so they can start class actions against the managers of the funds for negligence.
The odd thing about bankers is they can never stop their own excesses. Like a prodigal son being bailed out by an indulgent father, bankers persist in their foolishness to the point of when they have to be bailed out by the public authorities. In this case the ECB, Federal Reserve and Bank of Japan.
The good thing about the crunch is that it stops the activities of the private equity funds because it cuts them off from their life-blood – cheap money.
Anyone who sees 900 families in East Kilbride potentially losing their livelihoods, while their bosses have been getting multi-million dollar hand-outs, which is the situation at Freescale, can see the evil consequences of the combination of foolish bankers and predatory private equity funds.
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