Oh dear - Bradford & Bingley nationalisation looks increasingly likely

WTF?_2

Sir_Humphrey wrote: »

Nihilistic tooth-gnashing is fun on a forum, but it is easy to do when you have no positive suggestions for getting out of the problem. Or alternatively, badly thought out ideas that are superficially attractive but obviously would not work (like letting all the banks go bust).

We are in trouble, but I am trying to move the debate along towards some positive steps to address the problems, rather than just howling at the moon.

I'm sure that when Bernanke, Paulson and Darling read the thread, they will appreciate your efforts. :money:

Sir_Humphrey

!!!!!!? wrote: »

I'm sure that when Bernanke, Paulson and Darling read the thread, they will appreciate your efforts. :money:

As I have made perfectly clear before, I think the Paulson plan is half-baked.

I am genuinely interested in what you would do to solve the problems. Any fool can see that we are in a deep hole, but it is more interesting now IMO to work out how to:

a) Ameliorate the suffering this is going to cause

b) Make recurrences less likely.

I happen to think that both those things can be done. If you do not think those things can be done, then perhaps you should join one of the various Communist parties.

I happen to think that (in stark contrast to the NR debacle) that the government have handled the B&B crisis well. Credit where credit is due.

WTF?_2

Sir_Humphrey wrote: »

As I have made perfectly clear before, I think the Paulson plan is half-baked.

I am genuinely interested in what you would do to solve the problems. Any fool can see that we are in a deep hole, but it is more interesting now IMO to work out how to:

a) Ameliorate the suffering this is going to cause

b) Make recurrences less likely.

I happen to think that both those things can be done. If you do not think those things can be done, then perhaps you should join one of the various Communist parties.

I happen to think that (in stark contrast to the NR debacle) that the government have handled the B&B crisis well. Credit where credit is due.

There is no way to 'solve' the problem - the economy is fcuked.

The best we can do is take our lumps and get the recession over with ASAP and try to prevent the situation from spiralling totally out of control on the way down.

Half-baked measures to try to 'rescue' (ie. prop up) an untenable system will at best just spread the problem out over a longer period of time, at worst result in an even bigger catastrophe down the line. ie. Complete and utter systemic meltdown as opposed to just a really bad crisis and a recession.

As for making recurrences less likely, that's considerably easier to do. A proactive regulatory system with teeth combined with some lengthy jail terms for the white-collar criminals behind the dodgiest deals and trades that got us into this mess. The FBI in the US seem to be making at least a token effort to go after a few people - let's hope they widen the scope of their investigation and are giving the resources and backing they need. Can't see that happening though.

Sir_Humphrey

!!!!!!? wrote: »

The best we can do is take our lumps and get the recession over with ASAP and try to prevent the situation from spiralling totally out of control on the way down.

If we just let the market do it's business, then there will be another Great Depression what will last far longer than it needs to. Getting the recession over ASAP is what the current govt intervention is all about. It was a banking collapse that was the main cause of the last Great Depression.

I suggest some elementary economics textbooks for you. Rudiger Dornbusch wrote a popular one.

The amount of "creative destruction" that would be unleashed without intervention would leave little left to rebuild. Just look at the amount of industry that was needlessly destroyed in the early 1980s.

I am not that optimistic. Brown, although he has done well in the past couple of weeks is damaged goods after his blundering in the previous year. All the Tories offer is more of the same with vacuous soundbites and contradictory policies.

WTF?_2

Sir_Humphrey wrote: »

If we just let the market do it's business, then there will be another Great Depression what will last far longer than it needs to. Getting the recession over ASAP is what the current govt intervention is all about. It was a banking collapse that was the main cause of the last Great Depression.

I suggest some elementary economics textbooks for you. Rudiger Dornbusch wrote a popular one.

The amount of "creative destruction" that would be unleashed without intervention would leave little left to rebuild. Just look at the amount of industry that was needlessly destroyed in the early 1980s.

You can't buck the market.

There was an era of unprecedented 'wealth creation' or rather money creation through credit, without a corresponding increase in product in the economy at large.

It's no longer feasible to keep issuing credit, defaults are on the rise and deleveraging is occurring, as it must for the market to balance itself.

There's no magic shortcut to get around it and no amount of speculation by people on this group is going to make a jot of difference. Governments need to figure out a way to limit the damage, not try to avoid the problem.

What we can do here is work out ways that the average person can come out of this in the best shape given the circumstances. At the very least that means informing people of just how bad things are likely to become. Incredibly, even after a year of lively debate there seem to be plenty in denial still.

Here are my personal tips for coming out of this, in no particular order.

* Increase your work skills. Do as much professional training as you can get.
* Make yourself a lot more useful at work.
* Do some personal development education - eg Learn a second language or get some additional academic qualifications.
* Consider a career change if you are in an area under threat like retail, services or finance.
* Make sure your savings are somewhere safe like govt bonds or the state-sponsored NR.
* Consider hedging your savings with a small holding of gold (10%).
* Economise - use the savings to pay off debt, or..
* Build a short-term fund for emergencies. At least 3 months of expenses, 6 months would be better. Do this before any debt repayments.
* Don't take on new debt unless you can justify it in terms of a real investment.
* Try to become more energy efficient.
* Try to grow some of your own veg if possible.
* Do more of your own cooking instead of going for pre-prepared stuff or eating out.
* Buy stuff in bulk and then use it over time. Cheaper and gives you a useful safety buffer should your income be threatened.
* Trade down your car if necessary.
* Get into fitness at your local leisure centre. A useful and economical way to pass time as well as keeping you fit, healthy and alert.
* Try to develop a hobby that is also a useful skill to bring in some extra money.

Sir_Humphrey

!!!!!!? wrote: »

You can't buck the market.

You speak as though the market were some natural force. Of course it is not, it operates in a particular political and social structure, which can be altered so the market works differently.

!!!!!!? wrote: »

There was an era of unprecedented 'wealth creation' or rather money creation through credit, without a corresponding increase in product in the economy at large.

It's no longer feasible to keep issuing credit, defaults are on the rise and deleveraging is occurring, as it must for the market to balance itself.

All growth is based on credit. If there were no loans, there would be no economy. The issue is excess credit, and poor use of that credit. The market made those poor decisions.

!!!!!!? wrote: »

There's no magic shortcut to get around it and no amount of speculation by people on this group is going to make a jot of difference. Governments need to figure out a way to limit the damage, not try to avoid the problem.

Which is exactly what they are trying to do. In case you hadn't noticed, the [EMAIL="!!!!py"]!!!!py[/EMAIL] mortgage banks are now all defunct or taken over - the government has managed to do so without causing a wider panic that would have worsened the damage (although they almost failed to do so with their dithering over NR).

!!!!!!? wrote: »

What we can do here is work out ways that the average person can come out of this in the best shape given the circumstances. At the very least that means informing people of just how bad things are likely to become. Incredibly, even after a year of lively debate there seem to be plenty in denial still.
---
Lists sensible measures.

Those are all sound ideas on an individual level. I do many of them myself. Unfortunately, if everyone did that, there would be a big fall in what is called Aggregate Demand. If you get a fall in Aggregate Demand, the economy goes into a recession, and spiral forms as people lose their jobs. What you then end up with is something called Mass Unemployment. Mass Unemployment is a bad thing.

You can counter that by increasing aggregate demand. That can be done via tax cuts or increasing public spending funded through government borrowing. That results in increased growth, some of the proceeds of which can be used to pay off the increased government debt. That is why it is a good idea to raise taxes in the good times (which Brown actually did, although not by enough as the borrowing figures show).

Basic macroeconomics lesson over.

WTF?_2

Sir_Humphrey wrote: »

You speak as though the market were some natural force. Of course it is not, it operates in a particular political and social structure, which can be altered so the market works differently.



All growth is based on credit. If there were no loans, there would be no economy. The issue is excess credit, and poor use of that credit. The market made those poor decisions.



Which is exactly what they are trying to do. In case you hadn't noticed, the !!!!py mortgage banks are now all defunct or taken over - the government has managed to do so without causing a wider panic that would have worsened the damage (although they almost failed to do so with their dithering over NR).



Those are all sound ideas on an individual level. I do many of them myself. Unfortunately, if everyone did that, there would be a big fall in what is called Aggregate Demand. If you get a fall in Aggregate Demand, the economy goes into a recession, and spiral forms as people lose their jobs. What you then end up with is something called Mass Unemployment. Mass Unemployment is a bad thing.

You can counter that by increasing aggregate demand. That can be done via tax cuts or increasing public spending funded through government borrowing. That results in increased growth, some of the proceeds of which can be used to pay off the increased government debt. That is why it is a good idea to raise taxes in the good times (which Brown actually did, although not by enough as the borrowing figures show).

Basic macroeconomics lesson over.

This isn't about what happens on the grander economic level - I'm talking about what people can do on an individual level for themselves. We're not part of some sort of ant colony that responds en-masse to chemical signals from the Queen ant.

The wider economy will just have to muddle through without me suddenly deciding to throw caution (and savings) to the wind and going on a spending orgy in the cause of stimulating economic activity. The notion is absurd.

Sir_Humphrey

!!!!!!? wrote: »

This isn't about what happens on the grander economic level - I'm talking about what people can do on an individual level for themselves. We're not part of some sort of ant colony that responds en-masse to chemical signals from the Queen ant.

The wider economy will just have to muddle through without me suddenly deciding to throw caution (and savings) to the wind and going on a spending orgy in the cause of stimulating economic activity. The notion is absurd.

People have to reduce their demand, and that is part of the process of a recession starting. In order to reduce the result job losses (leading to a feedback loop or death spiral) the government can replace the lost demand by building infrastructure (eg look at how much of the London Underground was built in the 1930s - look at the Hoover Dam in the USA). This has the bonus of increasing the non-inflationary rate of growth when the economy finally recovers. The intervention of the government works through something called the Multiplier Effect.

Alternatively, they can cut taxes (although this does not guarantee that the extra money will actually be spent owing to understandable citizen pessimism). Whether the stimulus comes from tax cuts or more spending is a political decision.

What you need to understand !!!!!!? is that running a country is nothing like running one's own accounts. I run my personal accounts very frugally (eg I have never had a credit card). However, I also understand that the government does not need to worry about this as it can borrow much more cheaply than I can, and can smooth out (although not eliminate) the business cycle.

WTF?_2

Sir_Humphrey wrote: »

What you need to understand !!!!!!? is that running a country is nothing like running one's own accounts. I run my personal accounts very frugally (eg I have never had a credit card). However, I also understand that the government does not need to worry about this as it can borrow much more cheapely than I can, and can smooth out (although not eliminate) the business cycle.

But I am talking about running one's own accounts in the last few posts, I'm not talking about running the country.

The economy is screwed, it's heading for disaster. The only 'choice' the governments have is the shape that the crash takes. Hopefully they won't try to 'save the day' as that will at best prolong the agony, at worst precipitate an even more calamitous end. Either way, nothing anyone says or does here will influence that.

The only choice we have is to prepare ourselves for the crash.

Realy

Agreed you can not leave the market.
If the economy goes like the US it would wipe out every bank virtually (not only in the UK) everyone would lose their savings.
Result total anarchy and who want that?
Although a complete mess and irresponsibly caused it can not just be left to sort it's self out.

What is it £1000 per head in the US. I would pay if it stops an economic catastrophe (let’s call it charity)