Its been an odd week or so. The end of last week saw the Northern Rock fiasco.
Essentially Northern Rock was unable to borrow money on the markets to fund new Mortgages. This was apparently due to American banks making loans to those who couldn't afford them (apparently some of the type of loans these Banks made are illegal here). Anyway Banks were refusing to lend each other money so Northern Rock had a liquidity problem and the Bank of England were asked to make funds available.
Yes I know it seems odd that what a bank did in ooh lets say South Carolina has an impact on a bank here but trust me it does make sense.
This caused panic, people were queueing all day to get their money out. It didn't matter that every financial expert you could find, the chancellor and the Chairman of the Bank of England said the bank was safe and that this was all a technicality people panicked. It didn't really abate until the Government guaranteed savings held in Northern Rock.
Even then one fellow interviewed by readio five live still withdrew his money. Why he was asked. Well you can't trust the government. So what was he going to invest in? Government Stocks and Bonds. As another listener commented. "He doesn't trust the government and he is investing in something guaranteed by the government".
He was one of the worst examples of the public saying that experts don't know what they are talking about. I just despair of the stupidity of my fellow citizens sometimes. Whenever I hear these people I want to ask them what they do and insult their professional inegrity and see how they like it.
In all of this there is only one loser, and that is the poor employees of Northern Rock, many of whom will probably lose their jobs.
Before I go may I just make one comment. Over the years I have been astounded at how little people know about making money work. They stick money in savings accounts and investments with absolutely no understanding of what they are putting their money in.
They have no concept of risk or understanding of a balanced portfolio.
And they don't even try to find out it frightens the hell out of me.