I have often wondered about the nature of money. Where does money actually come from? How does the banking work?

The Northern Rock debacle has brought this into the limelight. Why should they have any problem if they have the money from their depositors in their savings accounts. The obvious answer might seem that they have already lent that money out but there is far more to it than that. It is far more likely that they never had the money to lend in the first place. Here is a link to a video that explains the concept of lending imaginary money. Well worth a look.

Click the link to learn about The Banking System Part 1

Banking Video Part 2

Banking Video Part 3Â – Currently unavailable

Banking Video Part 4

Banking Video Part 5

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

The Chancellor Of The Exchequer, Alister Darling, has announced that as of 1st October 2007 all savings accounts held in Banks and Building Societies will be 100% protected for the first £32,000.

This follows the obvious concerns of people who held savings in Northern Rock last month when worries about it’s financial stability caused queues of people outside its branches as people withdrew their savings. They were accused of behaving like sheep and told that there was no reason to panic but panic they did, and who can blame them for that, until Alister Darling stepped in and guaranteed their savings 100%. The government were clearly out of touch with peoples concerns and were slow to respond with the only action that would placate saver’s worries. This is now to be a standard proceedure and will reassure those whose savings are £32,000 or lower.

The chancellor is consulting with banks and other bodies with the view that the figure may be increased to £100,000 in the future.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

News that UBS, one of the worlds leading financial institutions and one that is considered more traditional than many newer firms, admits to making a loss for the first quarter in nine years may be just the tip of an iceberg. It’s impact will be felt in several ways.
Firstly it shows that the larger firms have been involved in the sub-prime debacle even if at a distance by buying packages of debt but this is perhaps to be expected. It would seem that pretty much every financial company had to some extent become involved.
For us in the UK one of the effects may be jobcuts in the city. When you consider that the continuing growth in the housing market has been largely coming from London, whilst house price growth has slowed to a crawl elsewhere in the country, you have to ask why that would be.
Eyewateringly large bonuses, paid to people who have simply been doing the job they are employed to do, have to be invested somewhere and for many that has been invested in the housing stock. The bonuses must surely be lower this year following the financial difficulties these financial institutions have suffered and some job cuts are likely and must have an impact on demand for property.
This is not to say there will be a crash in the housing market but all the commentators who only months ago were happy to say that house price growth would continue for the forseeable future now seem to take the view that a period of stabilisation is most likely. Bearing in mind that these commentators usually have an interest in house prices not dropping, these comments should be taken with a large pinch of salt.
House prices are far higher than makes any sense and a period of adjustment can surely not be too far away.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)