delusionofgrandeur

As a result of the video I found on youtube describing the ’sub-prime’ concept, I’ve been getting a major influx of direct traffic. Examinations of the delusionofgrandeur logs seems to suggest that the link is being passed around everyone’s e:mail address-books in Norway.

I became curious as to why so many people from Norway should be so interested in subprime. The story I found is an incredibly unfortunate one.

Now, most people will have heard of the sub-prime crisis in the USA and have seen the endless videos on the news of people being forced out of their homes due to over leveraged mortagages which they can no-longer afford.

Could this be happening in Norway too? Apparently it is not.

What has actually happened is that a banking group known as Terra Gruppen sold funds to four Norwegian public municipalities to buy massively complex investment products from Citigroup. In effect the municipalities borrowed money from Terra Gruppen which they then invested in the securities from Citigroup. The investments were high risk with small potential gains and big potential losses. This may sound a rather strange thing to be doing as a public body but this practice has actually existed in Norway since 2001.

Some might think that no harm is done, the money is not from the public purse as it is borrowed and will be paid back with the gains from the investment…right?

Wrong. It all broke down when the hedge fund turned bad. The subprime crisis in the USA hit Citigroup and the investments hard. Now the four public municipalities have to cover the short-fall in the investments with public funds. One small town has reportedly been unable to meet this weeks payroll so bad is the situation.

In essence these Norwegian people have been hit by the US sub prime crisis through no fault of their own. Their politicians have taken them into an investment that they had no real say over and now the people are having to pay for their politician’s mistakes.

The crisis is the hottest item in the news in Norway and is being referred to as the Terra Securities Scandal

I’m crossing my fingers and hoping we don’t have any poisons like this one waiting to hatch in the UK.

This entry was posted on Tuesday, November 27th, 2007 at 10:59 pm and is filed under Economy, Fantasy House Prices.You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.