I would like to report a robbery

magicdogsbrain

The financial sector made up 20% of the UK economy. Clearly, the market for cheap debt has done and we cannot
fuel growth by taking on debt any more. I would argue that this means the financial sector should
no longer be 20% of the UK economy – therefore – the financial sector needs to contract by at least half.

Therefore, banks shares need to come down dramatically, and about a third of banks should be allowed to
go insolvent. It is foolish to prop up an industry when the market has gone – it is criminal to do it with
your money – without even asking you!

This is going to cost us at least £1000 for every member of your family – at a time when debt is no longer
an option.

Am I the only person that thinks this is immoral and not economically sound. It is looking like the country
is going to go bankrupt as people and businesses try to refinance and cannot - whilst the banks will be ok operating with
no market! This “bail-out” does not address the inter-bank trust issue like the US plan that offloads bad
debt to the government (which I also disagree with – but at least it will get the banks to trust each other, if not their customers).

The issue is far too embedded in the fundamental miscalculation of risk in mortgage debt and commercial/domestic loans to be sorted out by throwing a few quid to the banks.

THE MARKET HAS GONE – DEBT IS EXPENSIVE – STOP FIGHTING IT

The banks have a way of wrapping simple ideas in extreme complexity and then blinding you with science. That is what they did with the toxic derivatives that were being traded – that is now the weapon that they are using to brainwash everyone into giving them money when it is clear that they can’t look after the money they have already got.

As is probably apparent, I am not knowledgeable in economics or banking matters, but then sometimes it takes somebody completely removed from the detail to take an objective look at an issue.

I would be interested to hear from people on their opinion on this issue and the impact of the 50bn on the general economy – do you think it will drag us further into recession and be counterproductive?

studiorex

There are two sides to the story and whilst I agree that something has to change in the banking sector I can't/won't believe that allowing banks to simply collapse and die is the way forward.

The Government has made a bold step by bailing out banks, effectively insuring our savings, however if the crises continues they may well find themselves up the proverbial creek without a paddle (and some may argue a boat).

I'm actually surprised the Government hasn't offered a major bond issue or similar. This would enable people to withdraw their long-term savings and put them into something reliable. Perhaps this is the next step - anyone with savings in a collapsing bank will automatically be given bonds to the value of £xxx and the can choose what to do with them. But then that doesn't help the many employees who worked hard for their customers and have families of their own to support.

mrcow

magicdogsbrain wrote: »

This is going to cost us at least £1000 for every member of your family – at a time when debt is no longer
an option.

Well at least by keeping both our jobs, my family will be able to afford it. If we lose our jobs, we could lose alot more than £1k. Money makes the world go round and we have to inject this money into the system to keep it going. The alternative is not something I'd personally wish to have to face.

going2die_rich

The financial sector though that generates the money is being taxed which is what help covers our costs for schools, nhs, military, etc.

I doubt we can afford to just let it reduce in half it's size. London is deemed as a financial hub at the moment and is facing big competition from places like dubai who really want to become like London. If it loses ground on this, we could see huge losses in years to come so can't just let it lose ground.

Reaper

magicdogsbrain wrote: »

The financial sector made up 20% of the UK economy.... the financial sector needs to contract by at least half.

Deliberately cause a massive recession?

magicdogsbrain wrote: »

about a third of banks should be allowed to
go insolvent.

If the failures were allowed to gain that much momentum nothing would stop the rest falling. The UK would be seen as unsafe, nobody would lend to the remaining banks and even UK savers would move their money abroad to safer banks.

magicdogsbrain wrote: »

This is going to cost us at least £1000 for every member of your family

No it's not. Most of that figure is loans, not gifts. And various securities have been taken in exchange. Hopefully most of it we will get back, some of it might even make a small profit if things improve.

magicdogsbrain wrote: »

people and businesses try to refinance and cannot - whilst the banks will be ok operating with no market!

Todays bailouts include terms that the banks getting the money must restart lending to their customers. However you do make a valid point that banks will go for the easy option of always wanting government money. They need to be weaned off with unattractive terms (such as the current restrictions on bank executives bonuses!)

magicdogsbrain wrote: »

This “bail-out” does no address the inter-bank trust issue like the US plan that offloads bad debt to the government

I disagree. The US plan is the wrong one, it simply gives money to bad banks. The government scheme is much better in that it provides liquidity instead at commercial rates (eg guarenteeing loans made between banks to restore trust and get money moving again). Indeed the US seems to be switching track to copy the UK now.

magicdogsbrain wrote: »

I would be interested to hear from people on their opinion on this issue and the impact of the 50bn on the general economy – do you think it will drag us further into recession and be counterproductive?

No. Governments tightened their belts during the 1930s and made the recession worse. Although it sounds crazy the most successful way out of a major recession is to spend money.