This page explains why banks go bust while creating social chaos and forcing you to surrender your home and life savings. It shows that there is a simple alternative. The Financial Times is now saying something has to be done. A lesson learned from the financial crisis. Simple - we have solved the problem and now teach it online and in publications like this website.

I had a brief conversation with staff in a branch of HSBC. It went something like this:

Did you know that when interest rates rise by 1% the mortgage can be repaid on time by increasing your payments by 1% p.a? That is by 1% every year.

Yes but it would be cheaper and cost less interest if you paid as fast as you can.

True. But by the time the borrower has reached the level of payments that your bank is demanding which might by around 10% more after a cumulative 1% interest increase, there may have been ten wage increases for the borrower. They can always pay faster when they can.

In other words HSBC will not have to spend money chasing arrears, repossessing properties, and evicting families. That is a lot of money saved. There will be fewer divorces and need for counselling and less stress and health problems.

And selling the properties underwater, [mortgage bigger than the value of the house], unable to get the bank’s capital back.

Exactly. And when that happens regulators demand that the bank’s reserves must be higher, making the whole operation of lending more expensive going forward.

What lenders like HSBC are doing when they demand that tens of thousands of borrowers must pay 10% more, is forcing people to divert spending away from things that people normally buy into higher repayments. In other words they are taking employment down and inviting a slowdown or a recession.

Doing this, diverting spending and slowing the economy, makes it even harder for some people to increase their payments, or even maintain their payments. Overtime and bonuses are at risk and they may fear for their jobs. Some people will start saving and spending even less. That puts more employment at risk.

In addition to this, lenders are forced to invest their reserves in government securities. When interest rates rise and all these additional costs are occurring, the value of the reserves crashes down, just when they are needed to protect the lender. What kind of sense does that make?

Again there is an alternative that would save the government money and protect the lenders at the same time, but that is enough information for one day.

The alternatives have been approved by some of the world’s top bankers and dozens of academics including economists – some of these are on my team. And the Institute of Actuaries in London was impressed. One Fellow at the Institute said he would never forget that day..

You can draw this to the attention of your MP. The more people that do this the sooner the system will be changed. Send your MP, your bank, your lawyer, the CBI, your trades union, a link to this web page. Send it to facebook using the link below and Tweet it using that link below.

We / I can supply impressive amounts of background research and data accumulated over decades. This is distilled into sensible observations and new knowledge. My team and I are writing a book but it takes time because book readers do not ask questions when reading. One never knows what information to include and what to leave out. Readers read and always there are times when they see what their brains tell them to expect. That can be different from what is written on the page. This is why at school and at universities they teach, provide tuition and make students write assignments. Some of my best supporters have had several corrective lessons and admit to being greatly assisted in that way. Hence I am inviting you to a meeting as a starting point.

Call me on Skype as edwarding2
Cell: 07399408382

No comments: