Major Financial Collapse?

Discussion in 'General Business Forum' started by OMGVape, Sep 20, 2020.

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  1. OMGVape

    OMGVape UKBF Enthusiast

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    There are lots of arguments going on about how serious the virus is, what measures the government takes and how badly the economy is damaged.

    Over recent years we have seen major banks going down the drain and I can’t help feeling we are about to see much worse very soon.

    Ok, personal savings are protected by the FSCS up to £85k but does this also apply to business funds? (I believe Tide customers aren’t protected by the FSCS).

    What happens if several big financial institutions collapse and the FSCS just can’t cope?

    My question is, how best can I protect my hard earned dosh and also the considerable amount of dosh sitting in two business accounts (Lloyds and Tide)?
     
    Posted: Sep 20, 2020 By: OMGVape Member since: Jan 21, 2018
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  2. Mr D

    Mr D UKBF Legend

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    Draw the cash out / convert it into valuable assets, stick under the mattress or bury in the garden.
    Buy a gun and learn to use it.

    Or you could rely on the government to keep your money safe. 91 years ago governments didn't do so well at protecting money...
     
    Posted: Sep 20, 2020 By: Mr D Member since: Feb 12, 2017
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  3. ecommerce84

    ecommerce84 UKBF Legend

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    Gold has always been the so called safe haven.

    The price has gone up a lot over the last 12 months, which tells me a lot of people share your concern.
     
    Posted: Sep 20, 2020 By: ecommerce84 Member since: Feb 24, 2007
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  4. Bob Morgan

    Bob Morgan UKBF Legend

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    Convert to CASH! MattressBANK is not losing account-holders' money at the moment! - Leaving it in the Bank DOES!
     
    Posted: Sep 20, 2020 By: Bob Morgan Member since: Apr 15, 2018
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  5. fisicx

    fisicx Moderator
    Verified Business ✔️

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    Which one were those? I agree we had to bail out the banks but none of them collapsed (except Norrhern Rock). The banks are in a much better financial position now as they can’t invest all your money.

    But I’d still not keep any cash in the bank. We have just brought a house with our savings.
     
    Posted: Sep 20, 2020 By: fisicx Member since: Sep 12, 2006
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  6. gpietersz

    gpietersz Full Member

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    Yes, but mostly against threats other than bank collapse: if you are worried about inflation and do not want to put money in the stock market, for example.

    Of course a bank collapse could cause inflation if the government prints money to bail out the FSCS.

    The UK does have index linked government bonds as an alternative inflation hedge.

    Which the regulators should have seen as a high risk. I remember the first time I saw their annual report (not long before the collapse) I though "what happens if interbank rates rise"? Why did the regulators (and the directors, and the shareholders) not see and do something about it?

    There was a recent thread about this with some good answers: https://www.ukbusinessforums.co.uk/threads/bank-account-£85k-max-cover.408291/

    In particular look at @LanceUk's comments on current regulation of banks.
     
    Posted: Sep 20, 2020 By: gpietersz Member since: Sep 10, 2019
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  7. mattk

    mattk UKBF Legend

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    It's just electronic numbers. You can't "lose" anything when a bank collapses. The real question is how long it will take for the Govt to untangle all the accounts and refund the balances.

    The biggest issues is if banks freeze accounts, then people, especially businesses cannot make payments. So this means no invoices, no salaries etc. and in turn people will be unable to pay their mortgage/rent, utilities, bills and so on. Effectively the system grinds to a halt. This is why the Govt in 2008 stepped in with vast guarantees of liquidity.

    Personally, I don't think the banks will be adverse impacted.
     
    Posted: Sep 20, 2020 By: mattk Member since: Dec 5, 2005
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  8. Interestedobserver

    Interestedobserver UKBF Legend

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    If ever that 85k per account etc was ever going to be relevant it's got to be the next couple of years
     
    Posted: Sep 20, 2020 By: Interestedobserver Member since: Apr 15, 2020
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  9. ecommerce84

    ecommerce84 UKBF Legend

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    Which I could see happening if several major banks failed.

    But I’d imagine the government would step in before a bank (or at least one of the major ones) collapsed anyway.

    At the very least, I’d move money away from the likes of Tide if they aren’t covered by the FSCS and into one of the big boys if you need it as cash in your account.
     
    Posted: Sep 20, 2020 By: ecommerce84 Member since: Feb 24, 2007
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  10. The Byre

    The Byre Full Member

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    1. From 2007-2010 the UK economy shrank by 5%. This year will see a 10% fall. Next year we have Brexit.

    2. Central banks almost everywhere are getting ready for negative interest rates. Be afraid, be very afraid!

    3. Buy real assets. Whatever floats your boat. Land, gold, buildings, or just nice things that you want.

    4. Freeing yourself of debt is probably the best asset you can have in the long term. Negative interest rates will only be a short-term plaster on the wound. Long term - inflation!

    5. The stock markets everywhere are bloated with silly money from all that QE that gets printed to get governments out of trouble. Stay away from the stock markets!

    6. China's Yuan will replace the dollar as the world's trading currency sooner or later - the way things are hotting up nicely right now, make that sooner!

    You can have a go at foretelling the future - it goes like this - If the central banks start pumping all the QE into the real economy to boost money velocity and general real economic activity, that could lead to an inflationary spiral.

    If the central banks start pumping all the QE into the financial economy to boost bank stability and maintain the status quo, that could lead to a deflationary spiral.

    So the future depends on what type of mistake the BoE, the ECB and the Fed are about to make!

    If you are poor, it's bad news on every front. If you are rich, get ready for a cold (economic) winter and keep your powder dry - on the other side of the swamp we are having to cross, there'll be one crazy land-grab!
     
    Last edited: Sep 20, 2020
    Posted: Sep 20, 2020 By: The Byre Member since: Aug 13, 2013
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  11. billybob99

    billybob99 UKBF Legend

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    Get yourself a surfboard and ride the wave.
     
    Posted: Sep 20, 2020 By: billybob99 Member since: Apr 23, 2013
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  12. bodgitt&scarperLTD

    bodgitt&scarperLTD Full Member

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    Could you expand upon negative interest rates a little? IE, if interest rates go negative, why is freeing yourself of debt such a pressing concern? Is this just 'kicking the can down the road' in terms of house prices etc?

    I've gone with buying real assets but leveraged with finance and mortgages, as I'm at that point in my life and don't have stack of cash sitting around. So from a purely selfish point of view I'm hoping for an inflationary spiral.
     
    Posted: Sep 20, 2020 By: bodgitt&scarperLTD Member since: Nov 26, 2018
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  13. gpietersz

    gpietersz Full Member

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    Normally good advice, but why pay off debt if its real value is going to fall because of inflation? Especially debt at fixed interest rates.
     
    Posted: Sep 20, 2020 By: gpietersz Member since: Sep 10, 2019
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  14. The Byre

    The Byre Full Member

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    Fixed is seldom fixed for long. Interest rates are always set to benefit the banks, or rather, they are set to benefit whoever buys the debts. And if the mortgage debt becomes delinquent, the banks buy them back for less than face value and can then foreclose and make a profit.
     
    Posted: Sep 20, 2020 By: The Byre Member since: Aug 13, 2013
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  15. mattk

    mattk UKBF Legend

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    They don't even need to be fixed, interest rates are going nowhere for at least a decade. Remember, governments have huge debts too, so higher interest rates distract spending away from productive endevours.

    As you say, inflation is good if you have debts. We've had trillions of dollars, pounds, euros pumped into the system in the form of QE since 2008 and inflation is still at long term average levels.
     
    Posted: Sep 20, 2020 By: mattk Member since: Dec 5, 2005
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  16. John Hemming

    John Hemming Full Member

    870 191
    The nub of this is that there is not that much certainty. There is actually more certainty than there was in February March, but it is much better than an asteroid the size of the moon hitting the earth.

    However, compared to the normal market certainty (which is not 100%) it is low at the moment. I have my own views as to what will or should happen, but I am happily testing the effects of some Glen Morangie at the moment so I wish you all well (even the lockdown supporters).
     
    Posted: Sep 20, 2020 By: John Hemming Member since: May 23, 2019
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  17. tony84

    tony84 UKBF Legend

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    It is unlikely banks (plural) will go under.

    The bank of england has been making alter their business models. They now need to be able to withstand (I think) a drop of 30% in their assets. They also have to have savers money (which again, I think) includes small business savings in a separate part of the business to that which makes investments.

    You would probably be best putting your money into building societies I imagine. They predominantly do savings and mortgages. So the only way of them losing significant sums is if house prices drop by 20-30% plus AND people stop paying en mass.

    Look at the last recession, the government supported them as they are literally too big to fail. Look how many staff they have.

    Personally, the only bank I wouldnt trust is Metro as their accounting department appeared to make a HUGE muck up last year.

    Failing that, go and buy all the bog roll you can afford.
     
    Posted: Sep 20, 2020 By: tony84 Member since: Apr 14, 2008
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  18. Mark T Jones

    Mark T Jones UKBF Legend

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    My view on that would remain the same, whatever the state of the economy.

    There is good debt and there is bad debt (not in the collections sense, but there wil be correlations)

    In this context, 'good' or 'bad' have pretty much nothing to do with APRs and everything to do with purpose and the appropriateness of the type of debt you are looking at.
     
    Posted: Sep 21, 2020 By: Mark T Jones Member since: Nov 4, 2015
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  19. SillyBill

    SillyBill UKBF Legend

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    Negative rates at least at these levels IMO is a token gesture, likely avoided by the BoE as any tangible benefit (probably minimal) is an unhelpful risk of shooting already fragile confidence by the associated press it'd generate.

    Negative rates is not concerned with the reduction of household or private debt, quite the inverse. A negative rate is designed to actively penalise the vast deposits banks keep on reserve with the central bank. So it is a small tax on their deposits that is a "use it or lose it", in other words...start lending more. Starting chucking more debt at the economy, households, consumers and business to bring demand forward and push GDP up. Except proven to not be that effective in Europe. Naturally when an economy is already leveraged balls deep in debt there reaches a saturation point of ability to take on more while servicing what you already have. So merely another sign policy makers are out of ideas and at the end of the road.

    I am not sure what an inflationary spiral does for your wealth unless the asset price outpaces the inflation rate itself. If it doesn't you have acquired more pound notes with the same pound notes buying you less. Treaded water.
     
    Posted: Sep 22, 2020 By: SillyBill Member since: Dec 11, 2019
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  20. jimbof

    jimbof UKBF Enthusiast

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    Out of interest - for those of you with pensions - have you been taking any evasive action? I've got a reasonable pot that is mostly in the markets. It's down about 10% from where it was this time last year, but I'm wondering if I'd be better of just sucking it up and moving to some relatively safe haven fund...
     
    Posted: Sep 23, 2020 By: jimbof Member since: Apr 10, 2020
    #20
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