Monday, 17 September 2007

UK Economy in Trouble

US Treasury Secretary Hank Paulson flies in to London tomorrow to discuss the worsening global credit crisis with Chancellor Alistair Darling, as fears intensify that the lending squeeze could be the last straw for Britain's buy-now-pay-later economy.

A global economic downturn is upon us. How many bad loans are out there that cannot be paid back ? That is the question.

We are seeing that ordinary borrowers are facing difficulties as interest rates go up. Likewise the banks and other financial institutions are facing problems with their high end borrowings based on masses amounts of leveraged debt. It reminds me of a company that has taken out too much money in an effort to grow but finds that ultimately their real (expanded) business can't support the outrageous debt that was originally taken on board. For a while everything runs well until it is time to account for the loan.

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