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On the eve of what is sure to be Alistair Darling's most important political statement there is speculation and counter speculation about how he will address the situation of the UK economy next...
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Tuesday 7th October 2008
Over the last few years we have seen an explosion in the world of online finance with many people scouring the internet for the best interest rates and the best offers available in the market place. However, today has shown that very often if an interest rate looks too good to be true then it often is too good to be true!
The freezing of deposits and withdrawals at Icesave is but no means the end of the game for the operation but the fact its parent company has been nationalised shows how serious the situation has become. While there is every chance that savers will have their funds returned at some stage, assuming that the Icelandic government does not go bust in the meantime, it does show that the higher interest rates which they were offering did carry a higher degree of risk.
It now appears that the Banks in Iceland had been very active on the loans front which meant that they could offer attractive interest rates in places such as the UK and then lend that money and more to consumers and businesses in Iceland at higher rates. It was only when the Icelandic economy stalled as a consequence of the credit crunch that we saw the bank start to struggle. |
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