IOU

Yesterday came accompanied by some rather startling news. Though I feared it would come, I did nothing about it. Primarily because I couldn’t.

As the Icelandic bank Icesave was put into receivership, bang went the money I had invested in their financial products. We’re not talking about very small sums here. Let’s just say I’m a pretty good saver. Plus, all those extra student loans had to go somewhere.

Yesterday things were looking pretty grim. Although there are compensation schemes which should have gave me reassurance that I would get all my money back (eventually), there was a lot of talk that the Icelandic scheme had no money to pay. And so, there was a distinct possibility that I could lose a small fortune.

This morning, the government have rode to the rescue. They didn’t have to. All of a sudden I’m feeling slightly more warm towards our politicians. I have never voted Labour (or Conservative, for that matter) and, in truth, am not likely to start now, even after this. But… (assuming all goes well) I do owe them a debt of gratitude for rescuing me and 300,000 other customers from this position.

It’s really hitting home just how much this financial crisis is impacting on everyone now. Banks disappearing left, right and centre. Money drying up for loans. Have you noticed that there seem to be far fewer of these adverts for easy credit today? That’s definitely a good thing. They were always the worst anyway. “Dad’s found yah scoo’ah!” and all that.

The age of austerity is soon to be open us. This is good. It is time that people tamed their wild and excessive spending. The problem is that people were spending what they didn’t have, thinking that they were rich because their house price was rising. When, of course, the value of your investments may go down as well as up.

And down they have gone. My parents, foolishly, have an endowment mortgage. It’s probably only going to reach about 2/3rds of the target, leaving them with a mega shortfall. They’re likely to have to borrow it off me, assuming I get my money back and still have it in five year’s time. But otherwise, they didn’t take part in the borrowing craze, and so they’re going to be just fine. In some respects, I’m equally glad that I didn’t graduate sooner, because I may have been a house owner by now, and would probably be in negative equity.

All through the system there are huge IOUs, and no one knows whether people will be able to pay them. Another one was created yesterday, and properly reinforced today. In some respects it was slightly amusing to be holding a credit note to the government of Iceland. Today’s it’s not so amusing in that it will be paid by my own government instead.

And then, in the long run, as all this economic turmoil is worked through, it will be me as a member of Generation Y, and the new members of Generation Z who will pick up the tab, through higher taxes, lower spending and the interest on all this huge borrowing. So we will, ultimately, pay the government back all the costs of the financial mismanagement that they’re picking up now.

It’s just such a shame that “we owe government” has a very unfortunate acronym, otherwise the concept might catch on.

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