World Wide Financial Culture
Even as debt has become an inevitable part of our world, nobody wants to lead an entire life saddled with the same. In this age of rampant consumerism and rising cost of loans, one finds himself immersed neck-deep in EMIs every month. The pressure of honouring one’s debt payment every month prompts him to take more loans to meet that, thus creating a vicious cycle and stifling other important monthly expenditures.
A prudent debt management plan is what each person requires and recognising this need, many specialists in UK have stepped in with various plans for managing debts, dealing only in unsecured debts and solutions specifically tailored to each individual’s net disposable income.
The array of services that form a part of the debt management solutions usually include:
Debt Management: The repayment plan is designed so as to enable one to pay what he owes to the creditor on a monthly basis and manage his debt in accordance with his budget as well as other monthly expenses such as rent, bills, household expenses and medical expenses are also met in a convenient way.
Negotiation programme: One the repayment plan is devised, it is presented to each of the creditors to solicit their acceptance. While the acceptance is not guaranteed, the advisers take responsibility in explaining the benefits of this plan to the creditors. However, it is advisable that one keeps up the monthly payment committed to the creditor as a part of the negotiation done on the individual’s behalf.
Freezing interest payments: Most of the plans dealing with the management of debts offer a possibility of freezing interest and charges. With an affordable monthly scheme, the term of repayment may get extended, prompting the creditors to levy additional charges on the debt. These plans attempts to explain the situation to the creditor on the individual’s behalf and achieve the best option.
The team of experienced and skilled advisors offers non-judgemental solutions and chalk out a solution for the management of your debts, either for free or nominal monthly fees. A monthly statement is issued to the individual as well as the creditors denoting the status each month.
In recent years many supposedly invincible global banks have collapsed.
The collapse is the result of many factors. A major contributor to the collapse is the subprime mortgage crisis, an ongoing economic problem wherein the global financial markets experience contracted liquidity. The liquidity crisis was triggered by a downturn in the world economy, which in turn led to a downturn in the housing market.
Global banks that collapsed adopted risky lending and borrowing practices. They lend money to people on the basis of their estimated repayment potential. The ventures for which banks lend out money were also risky or speculative. When the economy fell into a recession, such risky or speculative ventures failed and as such many of the lenders defaulted on their loans and became insolvent. With property values falling, the banks could not realize the worth of the loans by liquidating the collateral.
Global banks that collapsed also lend excessively. With a large percentage of such people defaulting, the banks literally ran out of money. When bad loans eventually reflected in the banks books, anxious depositors started withdrawing their deposits, causing a run on the banks, leading to their eventual collapse.
Many global banks that closed also indulged in other risky activities apart from issuing excessive and risky loans. Lehman Brothers for instance “brought” loans from banks and re-sold the same to investors based on the return, value and tenure. An investor who purchased such a financial product from Lehman Brothers would receive a share of the monthly EMI paid by the actual people who had taken the home loan. Now, by re-selling loans to financial firms such as Lehman Brothers, banks received their cash and interest upfront, with which they issued more housing loans. The success of the system however depended upon people who had taken the housing loans in the first place not defaulting. When people started defaulting, this financial web accelerated the crisis that the banks faced and hastened the collapse.
The collapse was a result of reckless pursuit of profits without taking adequate safeguards or factoring in risks. Bankers over-leveraged on the assumption that the economy would always go up, ignoring the cyclical pattern on boom and recession. As such, when the boom times ended abruptly and recession set in, the bankers faced a severe cash crunch and collapsed.
After the global banking crash in 2007, the worldwide financial climate has been one of sustained uncertainty. Despite the attempted intervention from several governments across the world, financial institutions are still nervous about the future. Sadly, this nervousness is stunting growth in North America and across the world.
Over-zealous banks spent years issuing reckless home loans and personal finance without a great deal of restraint. As a result, these banks were left with huge liabilities when their customers realised they couldn’t pay their loans back. The worldwide financial climate quickly took its lead from North America and a global recession quickly followed.
Five years later, the Western countries of the world are still struggling to overcome the same problems. Banks are now over-cautious, which is stopping many small and medium-sized businesses from investing in new staff and expansion. As a result, unemployment continues to remain high, government tax receipts are much lower than before and more people are claiming benefits from their respective governments. The worldwide financial climate is currently stuck in a vicious circle of debt, low growth and insufficient credit.
How to tackle this problem is the source of major contention. Many economists want to see governments funding investment in infrastructure, thus increasing jobs. There are some, however, who want to see sovereign debt levels reduced considerably. What started as a crisis within the banking sector has spread quickly to the governments of some of the largest and richest countries in the world.
Many people say that the worldwide financial climate is often a reflection of what is going on in America. At no time in modern history has this been more true than it is today. Loans issued to people who were considered to be high risks was a major factor leading to the 2007 crash. Many economists from around the globe will be looking to the White House and the US Congress for signs of improvement; because recovery in the United States will probably signal recovery in the rest of the developed world.
The worldwide financial climate has been shaky since late 2009. The most affected countries have been particularly those in the Euro-zone. The European financial climate is mainly as a result of economic crisis that has seen prices of essential commodities such as food and fuel increase at an alarming rate. As a result, most governments have found it almost impossible to finance their debt.
The actual warning signs started showing in late 2007 and early 2008. This is said to be the greatest financial crisis since the Great Depression. Some of the top stock markets have collapsed and multinational financial institutions have been bought out or have collapsed. Most countries, including some of the wealthiest in the world, have had to develop rescue packages to bail out their financial systems.
A global financial meltdown would affect the worldwide financial climate. The livelihoods of almost every individual in an increasingly inter-linked world will become a global concern. In countries such as Ireland, actions by banks and major financial institutions have left the nation in recession. The government, in an attempt to save the situation, have turned bank debts into a public obligation; hence a severe effect on the taxpayers and the economy.
Worldwide financial climate has also been hit by rising unemployment in countries such as Northern Ireland and even the UK. This, combined with the economic downturn and tightened lending, has led to the fall of major sectors such as the housing industry due to fall in investor confidence. This has also affected the government revenue leading to massive debts.
Despite numerous reforms being put into place, analysts predict that the current crisis may affect worldwide financial climate for three or five more years. Among the options being implemented by the European Commission are government guarantee on bank assets and government purchase of toxic assets from the banks. Some of these choices, because they do not suit the individual needs of a country, have left some major world economies in shambles.