Monday, September 17, 2007

Your home may be at risk...

As I write there is a run on the bank at Northern Rock, the mortgage lender that has had to call on Bank of England help following the sub-prime lending problems in the USA.

Pundits are appearing on TV, commenting on what they see as irrational herd behaviour in customerswho are queuing to take their money out. They seem oddly baffled that risk averse people (that is, the kind of people who keep their life savings in a savings account, not the stock market) are in fact averse to risk.

What risk? Well, we shouldn't forget that financial information routinely accompanies warm reassurance with alarming disclaimers - simultaneously enticing customers with promises of enormous returns, while pointing out in the small print that nothing is guaranteed, and that they could lose their homes. Even though this time I haven't heard any disclaimers by the experts and politicians, perhaps people just assume them.