Falklands : Will the Falklands Feel the Credit Pinch?
Submitted by Falkland Islands News Network (Juanita Brock) 17.08.2007 (Article Archived on 07.09.2007)
If you have borrowed to finance share prices, things could get interesting.
WILL THE FALKLANDS FEEL THE CREDIT PINCH?
An Editorial by J. Brock (FINN)
Hitting across many industries, the credit crunch that began in the US in July when the housing market began to slide, individuals and companies that have borrowed heavily to finance shares and to buy out companies are now in over their heads. It’s not just the loss of disposable income that causes consternation (better known as an adjustment) in the world’s markets but it is the loss of borrowed money making the card house to tumble.
When, on 19 July 2007 the Dow Jones Index closed at 14,000.41 those cards reached their pinnacle and it didn’t take much to get investors into a selling mood, resulting in the loss of confidence in the credit industry. At present all of the gains made thus far this year have been wiped off of several indexes. That’s billions of dollars off of the value of shares and commodities, from housing to hydrocarbons.
Those in the Falklands who quite wisely used disposable income to invest in shares will feel the pinch but if they have invested borrowed money on shares they could lose much more. Pension funds invested will no doubt take a hit, along with government money ear-marked to earn income. Businesses that need borrowed money to fund normal operations will find money tighter or no credit facilities at all, causing them to face liquidation.
Items that may be cheaper is our heating fuel, diesel and petrol. Declines in commodity investment have lowered the price of crude today. As people opt not to take unnecessary journeys, drive more fuel efficient vehicles and use energy saving methods at home, demand will go down. Less demand means lower prices. This means that less will be tacked on to the price of goods here and lower costs for fuel should freeze any hikes in the cost of services as well.
The Falklands will feel some of the ramifications of the world-wide market decline but it is hoped that Islanders focus on being wise with what money we have and not depend too much on borrowed money.
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