Discussion
Well at the start of the banking crisis I favoured letting banks fail, a view that didn't gain much support. Well stuff you lot I now have Joseph Stiglitz, the Nobel Prize-winning economist on my side.
"Professor Stiglitz, the former chair of the White House Council of Economic Advisers, told The Daily Telegraph that Britain should let the banks default on their vast foreign operations and start afresh with new set of healthy banks.
"The UK has been hit hard because the banks took on enormously large liabilities in foreign currencies. Should the British taxpayers have to lower their standard of living for 20 years to pay off mistakes that benefited a small elite?" he said.
"There is an argument for letting the banks go bust. It may cause turmoil but it will be a cheaper way to deal with this in the end. The British Parliament never offered a blanket guarantee for all liabilities and derivative positions of these banks," he said.
Mr Stiglitz said the Government should underwrite all deposits to protect the UK's domestic credit system and safeguard money markets that lubricate lending. It should use the skeletons of the old banks to build a healthier structure.
"The new banks will be more credible once they no longer have these liabilities on their back."
http://www.telegraph.co.uk/finance/newsbysector/ba...
"Professor Stiglitz, the former chair of the White House Council of Economic Advisers, told The Daily Telegraph that Britain should let the banks default on their vast foreign operations and start afresh with new set of healthy banks.
"The UK has been hit hard because the banks took on enormously large liabilities in foreign currencies. Should the British taxpayers have to lower their standard of living for 20 years to pay off mistakes that benefited a small elite?" he said.
"There is an argument for letting the banks go bust. It may cause turmoil but it will be a cheaper way to deal with this in the end. The British Parliament never offered a blanket guarantee for all liabilities and derivative positions of these banks," he said.
Mr Stiglitz said the Government should underwrite all deposits to protect the UK's domestic credit system and safeguard money markets that lubricate lending. It should use the skeletons of the old banks to build a healthier structure.
"The new banks will be more credible once they no longer have these liabilities on their back."
http://www.telegraph.co.uk/finance/newsbysector/ba...
If the banking system collapses then how....
...do my company pay me
...do i get cash out of the cash-machine which is no longer operating
...how do businesses buy and sell without having to deliver suitcases of cash to each other to pay for goods
...do we buy things that we dont have the full cash amount to pay for
...do my company pay me
...do i get cash out of the cash-machine which is no longer operating
...how do businesses buy and sell without having to deliver suitcases of cash to each other to pay for goods
...do we buy things that we dont have the full cash amount to pay for
Swilly said:
If the banking system collapses then how....
...do my company pay me
...do i get cash out of the cash-machine which is no longer operating
...how do businesses buy and sell without having to deliver suitcases of cash to each other to pay for goods
...do we buy things that we dont have the full cash amount to pay for
I don't think they're saying that the banking *system* should collapse, rather individual banks that aren't weathering the storm well. the ones that are will buy them out etc. so you'll still get your money....do my company pay me
...do i get cash out of the cash-machine which is no longer operating
...how do businesses buy and sell without having to deliver suitcases of cash to each other to pay for goods
...do we buy things that we dont have the full cash amount to pay for
Guam said:
Eric Mc said:
As happened in 1929 - and look where that led. Ten years of depression, mass unemployment and eventually a world war.
Yeah - let them fail I say.
Actually IIRC the banks didnt fail untill 1931 and that wasnt due to the initial problem that was due to a run in confidence long after the initial crash (I stand to be corrected but I believe that to be the historical position).Yeah - let them fail I say.
Cheers
Economic theory has not changed fundamentally since the days of Adam Smith. The general consenus amongst economists prior to 1929 was "laissez faire" i.e that governments had no business interfering in the marketplace and that market forces would always ensure that the economy remained in balance. With failure of basic market forces to prevent a stock market and eventually a banking collapse in the late 1920/early 1930s, governments realised that they had to do something. Thus developed Keynsian economics in some parts of the world and (more dangerously) national socialist/fascist type economics in others.
In the mid 1970s, "laissez faire" made a return in the guise of Friedmanism (after its modern guru, the late Miltomn Friedman) and was warmly embraced by political leaders such as Margaret Thatcher and Ronald Reagan. It seems to me that Friedmanism has run its course (for the moment) and we are seeing a return to Keynsian economics. Expect more of the same for the next 20 to 30 years before Friedman (or more correctly, his heirs) start holding sway again.
Guaranteeing deposits and loans to UK businesses is one thing. Backing a whole raft of totally bust financial dinosaurs (which is what we are doing) is another, and its crazy. Banks are not the solution, thay are the problem. They are the engine of depression - the Great Depression has surely taught us that - they depress asset prices, rack up the cost of borrowing and put businesses and individuals to the wall to save their own skins - and they should be taken out of the loop. It is the commerce we need to preserve, not the current bust banks. There are plenty of solvent ones you can use and we should have been transferring our business to them wholesale.
Edited by cardigankid on Monday 2nd February 16:24
didn't the swede's do something similar in that when they nationalised/part nationalised their banks in the early 90's they sorted the debt structure so that they had one 'bad' bank which they let fail or sold off bit by bit?
am all for sticking 2 fingers up to the world over this but i can't see it ending well for the uk if we did.
am all for sticking 2 fingers up to the world over this but i can't see it ending well for the uk if we did.
Maybe one of the main reasons why we're all in this mess is because the Federal Reserve is privately owned and is not accountable to the US Government. The Fed has openly stated it is above Government and its controlled by just a few private investors. The question everyone must ask is, who are the investors??
www.endthefed.us
Is the Bank of England setup in the same way?
Im sure one of you on here can answer this question - why is it that all UK Governemnt agencies etc have a .gov.uk at the end of their web adress, whereas the Bank of England has a .co.uk ?
www.fco.gov.uk
www.metoffice.gov.uk
www.homeoffice.gov.uk
www.dfid.gov.uk
www.bankofengland.co.uk
Does this mean its a private company? i maybe wrong but it would be great if someone posts an answer to this.
www.endthefed.us
Is the Bank of England setup in the same way?
Im sure one of you on here can answer this question - why is it that all UK Governemnt agencies etc have a .gov.uk at the end of their web adress, whereas the Bank of England has a .co.uk ?
www.fco.gov.uk
www.metoffice.gov.uk
www.homeoffice.gov.uk
www.dfid.gov.uk
www.bankofengland.co.uk
Does this mean its a private company? i maybe wrong but it would be great if someone posts an answer to this.
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