Many US banks, including the large ones, are in financial trouble. They have lent a few trillion dollars in 30 year mortgages at fixed interest rates of 3% or less. Based on the current high interest rates, the value of their mortgages could have fallen by 30% or more. The loss is staggering.
The banks are able to mark these mortgages as "held to maturity". They can spread out their losses over the next 30 years, but it will still be a painful loss.
If there is a large withdrawal of deposits, they have to sell off their mortgages at steep loss to pay the depositors. They have to recognize the losses immediately.
Not all banks are caught in this financial crisis. Some may be less exposed than others. However, if some of the more exposed banks fail, they will affect the other banks due to "contagion". The whole banking system could be in crisis.
To avoid the fall of the banking system, the US Fed will have to lower their interest rate and allow inflation to remain high. The high inflation will mean that the ordinary people will pay for the losses through higher cost of living.
This is not fair to the ordinary people, but it is likely to be the outcome. I cannot see anyway that it can be avoided as the alternative is a collapse of the banking system, which will be disastrous.
The banks in Singapore are less exposed to this financial crisis, compared to the US banks. The Singapore banks do not offer long term mortgages at fixed interest rate. Some may fix the interest rate for up to 3 years, but the interest rate will be adjustable, i.e. floating, after this initial period.
The floating rate mortgages protect the banks from the fall in the property values (due to high interest rate). However, it does not protect the owners, who have to bear the loss. The owners who cannot afford the higher interest rate have to give up their property at large losses. It will impact the economy and the property market badly as well.
If the US Fed lower the interest rate to protect the banking system, it is likely that other countries will follow. The global economy will have a long period of high inflation, but it is probably better than a collapse of the banking and financial system.
Disclaimer - this is a personal view. I may be wrong.
Tan Kin Lian
http://tklcloud.com/Feedback/feedback2.aspx?id=5711
5 comments:
4 yrs ago hor, car wash $7. Today ah, $12. I cannot even pay my helper $7 to wash my car bcos some micro manager said helper cannot wash car bcos not domestic. Rather get it wash once week, i get wash evry 2 weeks.
I try do shopping at malls after 5pm car park charge per enter. Hawker center near my house just finish renovated. If eat out I bring wet tissue to clean filth table with family . They cheaper than food court.
I get my hair cut at 10 minutes korean oulet $15. Saloons charge above $40. After walk out my haircut no difference from saloon cut after hair wash.
I get my children reading books instead of tuition. If got straight bus to place i go, i leave car at home to take bus.
I go for comfort dressing than brand. Car also same. I go for reliabilty brand than show off off.
If want atas how much money also not enough. I also like to show my children that atas did not make a respect person. Only being humble is respect. I never watch PAP bcos hate my children to grow up brain that only some people can know everything.
One ancient lady was holding a small bag of coins queuing at DBS.
When her turn came up she took out her POSB book and spoke to the bank person in Mandarin with her small bag of coins for depositing into her account.
The person behind the counter told her the coin-depositing machine is outside of the bank.
She mumbled something about the coin machine that used to be inside and that they did it for her with her booklet and IC.
The behind-counter girl came out, led her to where the coin machine was and returned to her seat.
The ancient lady looked at the machine and held her small bag of coins protectively. She looked and murmured "Wur Pah" [I scared] and walked away.
There are still a lot of people out there who feared technology, whilst those who are good at it find the convenience incomparable.
Personal space enhances well-being. Nowadays living in homes with 5 bodies in above 1400 sq. ft is considered unusual.
For most homebuyers, a home is so much more than a roof over their heads. A spacious home enables every family member to have a personal space without worries. A spacious home provides functionality with aesthetics leading to an ideal living environment. At the end of the day, who wouldn’t prefer to enjoy their ‘me time’ in their private spaces?
Alas, the shrinking of homes might one day turn homes into broom cupboards.
Coes are there for a reason. It is one of the few simple and straightforward systems left in
this *supposedly efficient* country. BLEH!
Nonetheless, if nobody buys cars it would even be better, Coes would drop to $1.
If everybody die die expects others to make sacrifices but not themselves, this is what we get.
Nobody can fix everything if nobody wants to play their own part. If want the car to be ho miah, then you pay.
Most Malaysians take busses across the causeway daily to work here. They make sacrifices for the high currency exchanges. They may not like their punishing routine, but when they see what they get 3 times more in their earnings with the currencies, they felt its all worth it.
NO PAIN NO GAIN!!!!!!!!!!!!!!!!!!!
Agree with enough confusion and I think the people have had enough;
My father came home and showed me his dental bill from 2 private clinics extremely upset asking me for answers WHY? The first clinic charges him under MERDEKA CHAS and subsidies were calculated at 42%. This dentist's description was consultation, X-ray, extraction and cleaning. For certain treatments, he was given a referral letter to someone else. The grand total was $400 but after subsidies, he paid $224.50. No GST
The second dentist bill $1004 but the subsidy was only $16. He described that the diagnosis was similar but this description was an examination, X-ray and CT scan. Sub total $930, 8% GST at $74.40. Who came out with all these kinds of f_cking schemes?
Whoever suggested Coes should be this and that ought to be shut?
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