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/ 2009-01-30 01:12
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Uznany gracz - weteran 93/94
The job losses are stacking up across the world.
According to The Times, about 70,000 jobs went globally yesterday. Most of the cuts were in the US - construction equipment maker Caterpillar is cutting 20,000 jobs, while mobile phone operator Sprint Nextel is cutting 8,000 posts.
In Britain, steel maker Corus is cutting 2,500 staff, while ING and Philips, both of which have operations in the UK, are cutting thousands of staff worldwide.
If companies aren’t making as much money, they have to lay people off. But unfortunately, as more people lose their jobs, the less money there is to go round, and the more bad debts that will build up.
No wonder banks don’t want to lend...
Careless lending has left banks very vulnerable
The banking crisis came about because banks had overstretched themselves. They loaned out more money than it was realistically possible for the economy to pay back. That left them very vulnerable when defaults started showing up in the dodgiest loans – the US subprime market.
Lending clammed up. Governments tried to come to the rescue, and are still trying. Interest rates have been slashed, money is being printed, and central banks are crossing their fingers and praying for inflation to magic all the bad borrowing away.
But all that careless lending led to careless investment too. Businesses and jobs were created that relied entirely on the continued existence of large quantities of borrowed money to fund them. Now those companies and jobs are disappearing along with the borrowed money.