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Bleak Future
It has been a hard year so far for the leading financial institutions on the planet. Some of the biggest players in the market have disappeared or suffered enormous hits, and according to statistics from some of the biggest banks on the planet, things are not likely to get much better in the near future.
Part of the problem is that for all the money being pumped into the system, the liabilities remain on the balance sheets of the main banks. In simpler terms the family in middle Missouri who were unable to pay their mortgage are still unable to pay their mortgage and the bank will have lost a not insignificant sum of money on the defaulted credit agreement. This has happened all over the US and whilst it might be simplest to blame everything on the US, all over the world banks are discovering that they have offered mortgages and loans to people who simply were not capable of paying it back.
The US bail out package has pumped money back into the market, rather than removing the debt, believing that if they can get liquidity into the market, the interbank lending rate will drop and banks will begin lending again. That isn’t going to make the problem go away, though, because whilst the world might operate on credit agreements, the family in Missouri are still unable to pay their mortgage – and might in fact no longer own their house.
At the same time central banks have been taking all sorts of measures to ease things, the interest rate has been slashed here, and Ben Bernanke – head of the US Federal Reserve – has recently declared that central banks around the world are ready to pump even more cash into the market than they already have. Whilst this sounds like a great idea, that money has to come from somewhere – usually from government borrowing which is apparently going to devalue the currency – making things even worse for the economy.
If you are interested in trading or spread betting these actions are worth keeping an eye on. spread betting and CFD companies like City Index offer all sorts of potential markets, and one of the most popular is the financial sector, this sector is popular because there is (especially at the moment) a lot of movement which gives traders the opportunity to make a lot of money quickly. All the different bail out plans and central bank investment creates movement in the share prices in these markets and therefore if you are to successfully trade you have to keep an eye on these activities.
That is the core of the most sensible spread betting advice, keep abreast of nearly every development that you can and you will find that you make more money than you lose. If you trade blindly on the market you will end up losing, and as spread betting is a form of leveraged trading, you may well end up losing big.
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