What the Credit Crunch Really Means
You can't avoid it. The term is everywhere. On the television, in our papers, on the lips of the man down the pub - who struggles to pay for a pint even in good times - but what does the phrase 'Credit Crunch' really mean? Come to think of it, what do all those other financial terms mean as well?
Being a writer and an ex-banker* I thought I'd combine the two 'skills' and pen my own simplified glossary of the financial words and phrases that are bandied about all the time but are gobbledegook to most people. So the next time anyone asks for your opinion on the worsening crisis in the sub-investment grade market, you can confidently say, 'I never rated it myself,' or in answer to being asked What is the best investment for cash? reply, 'I accept cheques for my advice too.'
Here they all are in alphabetical order:
| Bear | - mythical creature representing caution and restraint in the markets |
| Blue chip company | - frozen food manufacturer |
| Bull market | - place where everyone talks bullocks |
| City fat cats | - it's all that urban living and fast food stocks. Try exercising caution and cutting out junk bonds. |
| Credit crunch | - chocolate biscuit bought on spec |
| Credit risk | - the likelihood of all your friends buying their round in the pub |
| Dow Jones | - the market that lives next door and everyone else tries to keep up with |
| Economic capital | - 'E' |
| Finance Minister | - the person leading our prayers for a financial miracle |
| Financial crisis | - being accosted by charity collectors with only notes in your pocket |
| Footsie | - traders kicking worthless stocks and shares under the desk |
| Futures and Options | - forget them, we don't have either any more |
| Gold standard | - a flag worth waving, if you can carry it |
| Good investment | - David Beckham modeling his underwear |
| Government bail out | - the state's answer to the recent floods |
| Liquidity freeze | - putting your pension on ice |
| Market Risk | - where the price of stocks and shares can go down as well as under |
| Operational risk | - the likelihood your broker will survive when his clients threaten to cut out his liver |
| Shares | - one for us and one million for the bankers, but hey, who said it was an equitable life? |
| Speculation | - uncertainty over the outcome of your optician's appointment |
| Stock exchange | - you might as well, they're not worth keeping |
| Sub-prime property | - a shed |
| Wall Street | - a place full of Wallys |
*Disclaimer - Steven Barley would like to state categorically that his role in the City was to implement business processes and IT systems that calculated the market, credit and operational risks of the bank to ensure there was always sufficient economic capital to cover extreme adverse events - like what's happening right now. He also would like to state, at the risk of sounding smug, that no bank he ever worked for has gone bust (as at October 2008), or lost its depositors any money. Good, I'm glad he sorted that out for us...
...I always said he was a nice chap.