If the banks hadn't done what they did.....
Discussion
How much better or worse off would we have been?
It is, of course, very fashionable to blame bankers for the woes of the recession, cancer and child abduction, but now that the banks are exercising more caution in their lending, they are being criticised for stifling the economy and preventing growth.
This makes me wonder. Given the amount banks and their employees must've pumped directly into the tax coffers and the economy at large during the preceding boom years, to say nothing of the wealth generated by companies who grew successfully off the sort of investment they cannot currently get, would the economy overall be in a better or worse state now if the excesses of the previous decade or so had been strangled at birth? Have the losses post-2007 more than wiped out the extra profits of the preceding years, or are we still ahead of the game and complaining somewhat unfairly?
I don't know the answer, so was wondering if anyone else does, and why it never seems to get discussed by the media?
It is, of course, very fashionable to blame bankers for the woes of the recession, cancer and child abduction, but now that the banks are exercising more caution in their lending, they are being criticised for stifling the economy and preventing growth.
This makes me wonder. Given the amount banks and their employees must've pumped directly into the tax coffers and the economy at large during the preceding boom years, to say nothing of the wealth generated by companies who grew successfully off the sort of investment they cannot currently get, would the economy overall be in a better or worse state now if the excesses of the previous decade or so had been strangled at birth? Have the losses post-2007 more than wiped out the extra profits of the preceding years, or are we still ahead of the game and complaining somewhat unfairly?
I don't know the answer, so was wondering if anyone else does, and why it never seems to get discussed by the media?
Dont they say a recession is when wealth is returned to its rightful owners?
An excess of credit/money chasing too few things results in malinvestment. A bit of malinvestment as you suggest might be seen as a good thing, as some finds its way into unorthodox places. Unfortunately, as various economists have rightly said, our financial system isnt set up to promote business. For a lot of people its actually easier to remortgage your house and spend the money to start a business than to simply get a business loan. So most of it goes into mortgages - Your £200k house that cost £50k in 1995 is the same house, you derive the same utility from it, its only important if you can realise that 'value', ie by owning two or more houses (less than 2% of the population) (equity release doesnt count, unless you want to be on the street or extracting more of your income). Of course, once housing got completely out of hand they started leveraged lending on everything else hence oil at $147 a barrel and 120p litre petrol. Thanks banks.
Put simply, far far too much of the banks lending didnt go on business or production, but speculative gambles - and yet Govts across the world seem to be doing everything in their power to continue this malinvestment.
Besides, im not sure giving Gordon more tax receipts to misspend could be considered'good thing', although he probably would have borrowed them anyway if the banks hadnt.
Should we blame the banks? Maybe, though they were just doing what they do, Compete to lend and capture as much as the market as possible. Governments and 'independent' (haha) central banks set the irresponsibly low interest rates and Gordon rigged inflation stats to make it possible. The banking system is a disgrace, but its politicians who refuse to reform it.
An excess of credit/money chasing too few things results in malinvestment. A bit of malinvestment as you suggest might be seen as a good thing, as some finds its way into unorthodox places. Unfortunately, as various economists have rightly said, our financial system isnt set up to promote business. For a lot of people its actually easier to remortgage your house and spend the money to start a business than to simply get a business loan. So most of it goes into mortgages - Your £200k house that cost £50k in 1995 is the same house, you derive the same utility from it, its only important if you can realise that 'value', ie by owning two or more houses (less than 2% of the population) (equity release doesnt count, unless you want to be on the street or extracting more of your income). Of course, once housing got completely out of hand they started leveraged lending on everything else hence oil at $147 a barrel and 120p litre petrol. Thanks banks.
Put simply, far far too much of the banks lending didnt go on business or production, but speculative gambles - and yet Govts across the world seem to be doing everything in their power to continue this malinvestment.
Besides, im not sure giving Gordon more tax receipts to misspend could be considered'good thing', although he probably would have borrowed them anyway if the banks hadnt.
Should we blame the banks? Maybe, though they were just doing what they do, Compete to lend and capture as much as the market as possible. Governments and 'independent' (haha) central banks set the irresponsibly low interest rates and Gordon rigged inflation stats to make it possible. The banking system is a disgrace, but its politicians who refuse to reform it.
nonplussed said:
Kermit power said:
why it never seems to get discussed by the media?
I don't know the overall answer to this interesting question, but the answer to the snippet above is surely that it - as in a level, in-depth discussion of the facts - doesn't sell papers. Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff