Job Crisis Deepens

Everyday news regarding the current economic crisis seems to get worse and worse. The latest news hot off the press is that the already struggling bank RBS is due to cut a further 9,000 UK jobs within the next few months. It’s a sad state of affairs to see a government I helped put in power be so powerless and ineffectual in the face of the current banking crisis.

Let’s break it down back to the beginning. First off RBS is a big multinational corporation owned by various UK and international shareholders. When a company makes huge profits they take out their running costs, staff fees and expenses. After all that’s taken into consideration shareholders receive a dividend payment depending upon net profits and reinvestment figures. While the going was good RBS shareholder and stake holders made a lot of money. Now that it’s all gone Pete Tong, RBS have gone cap in hand to the government asking for immense taxpayer bailouts.

How did it all go wrong? Well for starters RBS bought thousands of sub-prime mortgages throughout America without accurately assessing the financial stability of the lenders. When the housing market crashed these mortgages became toxic assets. Banks essentially bought mortgages at high prices and then when the market decreased and the lenders couldn’t pay up the banks were left with assets worth less than what they had paid for them.

Done on a huge scale; this left the banks with huge debts and massive cash flow problems. This in-turn had a huge knock on effect to economies worldwide. Markets tumbled and thousand were left homeless and unemployed. Since then the crisis has deepened with more jobs under threat and many companies struggling to deal with debt and cash flow problems. In recent news a small rift between the PM, Darling and Mervyn King became apparent. Mr Brown clearly wants to continue pulling rabbits out of a hat by spending his way through a recession, where as Mr King and Darling are more inclined to hold out on further stimulus packages in an attempt to assess whether or not previous measures taken have had any success. Fiscal experts from the US suggest that global markets are starting to recover which is good news for those hoping to find employment, but too much hope to early could encourage a false start which could precipitate a further recession a year or two down the line. What is clear is that the days of unregulated banking are long, long gone….

Toxic assets explained…

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