IMPORTANT: Why the banks MUST be allowed to fail!

wazaaap123

I found this post on another forum and thought it would be good to discuss.

I am slightly nervous about writing this as it could spark a revolution, all be it bloodless. I do believe the concept is right both logically and morally, even if it rocks the status quo, it is in the best interest of the British people which is ultimately more important. This information must be gravely considered before taking action.

Given that banks lend 9 times more than they borrow (their borrowings are your deposits that you lend them) and the average UK debt has approximately £40,000 of debt and the average savings a mere £7,500 when the Government says propping up the banks is protecting UK savings, what they really mean is they are protecting your debts!!!

If the banks were allowed to fail and their debts written off the average person would be around £32,500 better off. Given this point, why is the Government using tax payer funds and borrowing more, the interest for which will be charged to our children’s tax bill, when we would be better off if the banks fail?

If the banks failed and their debts written off, many would have their mortgages wiped. If you have paid all the demands made upon you by the bank the bank doesn't have the right to reposses your home. If your bank fails and stops making claims on you who are you going to pay?

Remeber the banks are telling you know that if they don't get multiple bailouts and they go bankrupt the money you have lent them in savings etc. will be lost, (Blackmail) it is only right then that the money they have lent you is also lost if they fail.

If they ever sent you notice regarding repossession due to bankruptcy, all you need to do is gather legal advice (or do it yourself) and confirm that you have received their notice but are contesting it due to legal reasons - these can include:

1 - It was not your fault that the bank became bankrupt and feel it was down to bad management or irregularities within the bank, which you require thorough investigation of
2 - You have not missed payments on your mortgage and through no fault of your own, they are no longer willing to honour your contract. They are in breach not you.
3 - You do not feel that it would be ethical for the bank to reposses your home and wish to take this to the EU or World court due to breach of human rights

Bear in mind to that with potential take over suitors knowing this is mortgage payers intent, how many will want to buy these morgage "assets"? The contract can either lapse, or you can buy your own mortgage back at whatever price you can negotiate. Liquidators have a legal obligation to try and sell these assets to recover creditors money so make an offer.

Those on variable rates who are worried the bank will jack prices, check what your variable rate is, 2% above BOE for example. They cannot exceed this. It should not be much of a cocern anyway as you will only have any imminent payments to cover, bank runs only take a few hours to collapse a bank.

With mortgages gone, disposable income would increase. With so much more disposable income you could afford to by a new car, go out for some expensive meals or build an extension. Pumping cash back into the faltering, manufacturing, service and construction sectors and driving unemployment down.

With parents mortgages gone, many could choose to give there children more help financing university education which benefits society.

If the banks fail, the housing market would be freed up. No longer would sellers have to keep the price above the mortgage secured on it and with no banks to lend crazy mortgages prices would fall to more realistic levels. First time buyers would have more access to the market and as demand returns the construction industry enjoys a boost.

The boost in spending will also increase Govt. tax revenue, (which will be useful later).

Potential losers
Low to mid level Bank Employees:
Those that had debts with the banks will have those removed reducing the urgency with which they need to earn. The boost in consumer demand will also increase demand for labour, creating jobs in other sectors.

Top level Bank Employees:
The shares they gifted themselves in the banks for free (they didn’t buy them on the open market) will be reduced to nothing. However those with diverse portfolios will benefit from the boost in consumer demand and profitability in other companies. Most will also have susbtantial cash and other assett reserves.

Also you would be surprised how little of an obstacle “Bought the country to its knees” on their CV will be for their friends finding them top jobs in other industries.

Pensioners:
Those which loose there pensions are the new recipients of all the cash the Government had lined up to give to the banks. Also the increase in tax revenue from the new spending will help finance increase state pensions. Many will have seen the value of their pensions savaged anyway over the last few weeks.

Savers with more savings then debt:
For the few who have more savings than debt and fail to get their money out before the crash, perhaps they were saving for a house? House prices will come down by a substantial amount. This group should be allowed to be the first to withdraw there savings.

Investors:
When entering the market “The value of your investments can go down as well as up” do they deserve a government bailout any more than a gambler at a casino deserves one? Those with diverse portfolios will benefit from the economic upswing in there other share assets. Looking at your portfolio right now, what kind of condition is it in anyway?


Inflation:
Since no new money has been created, in fact a whole load of debt money removed from the economy there shouldn’t be inflationary pressures. People will still be receiving in general the same pay cheques.

Potential Negative Side effects:
Housing speculators who have large debts seem to gain lots of equity from all of this. However house prices will dive so speculators will not have massive gains. Home owners won’t be affected by the dive in house prices, as they will simply be swapping one house for another of similar value if they decide to sell

Those who have run up debts will get them wiped, those without debts will feel cheated. This is no different to begrudging a gambler who bets on something and wins, whilst you either bet and lose or refrain from placing a wager. This is the honest mechanism of Free Markets.

Now when you understand this, and you have contracted with a bank for an instant access savings account you are perfectly within your rights to withdraw your savings at any time. It is not your fault if banks became too greedy and have over leveraged there finances and will collapse if you choose to exercise your legal rights. Again this is no more your responsibility than a Las Vegas gambler who borrows and looses.

If the Government chooses to maintain your debts rather than let the banks fail and improving your economic situation, by nationalising banks rather than letting them fail. Have they really got your best interests at heart? If you think not, you can take action to achieve the results you want, direct self governance. There is no need for the likes of un elected "Peter, twice resigned under accusations of corruption, Mandleson" (or Blunkett for that matter) to hand down un fair, unjust and un consulted policies from on high without either your consent or your welfare at heart.

We would no longer have to revive the economy by being allowed to borrow more. We would actually have more! Who ever borrowed there way out of debt?

If you wish to act on this simply withdraw your savings from all banks, and send this info to everyone in your address book, CC media outlets and your MP and post it on every forum, blog and website you have access to.

Aegis

What a great idea... Bring the entire banking system to its knees and ruin the entire economy. Whoever came up with that was a real genius...

I hope that the idiot who wrote this post realises that causing a huge run on banks would just end up with more bailouts using more tax money to stabilise the banking system, and would royally screw everyone. Clearly he's not thought this one through with any degree of realistic investigation!

Aegis

Forgot to mention that mortgage debt obligations would be sold off as assets during the winding up phase of the company. The government most certainly WOULD take those assets on if the bank failed as long-term compensation for the amount that had to be paid out by the FSCS to the depositors who would lose their money because of this selfish and short-sighted plan. This is assuming that pension funds and private investors couldn't work out a way to get in on the property-secured lending obligations.

Really, this entire plan is incredibly badly thought out.

1694

He he, I wrote it, it was prefaced with "This information must be gravely considered before taking action." As I wasn't sure how accurate it was. Further discussion of course reveled some facts.

Proping up the banks is still protecting your debts not your savings though.

If a bank is liquidated, loan repayments (mortgages) are still repaid and passed to creditors(savers) by the shell company managed by liquidators. This might be the fair thing to do, bin all the bankers in the middle and the fractional reserve system they manage and just let everyone pay off their contracts.

Problem being because of the money creation of fractional reserve that creates a debt on money that doesn't exist where can the money come from to repay the debts.....the whole system is completely !!!!ed and cannot be sustained. It will be proped up this time again, as it has been before...but I think next time it will be to big and people will have to give up too much and there will be anarchy.

1694

The banks still should not be proped up with governement loans. Your children will hate you for doing this.

Pssst

Shall i tell you what would happen if the banks were allowed to fail? I have worked all my life and never been dependant on the state. I'm like many others. I have savings and investments. If the banks failed and i lost all that i had worked for, I wouldnt go out to work anymore. I'd become feral and live by my wits and I'd be looking for revenge and recompense. I guess many others would too. The result would be as close to civil war on our streets,far worse than anything that the race and poll tax riots gave us. That price is too high a price to pay.

1694

Which is worse? that Or your children work every waking hour for a substience existence while the bank managers collect over 100% of their efforts, so for every hours work they do they owe all their pay plus another 10 mins work.

As explained in other posts, the country already owes more than it produces. What it owes is gaining compound interest, and what it produces is being deminished as more and more means of production have to be given up every year to try and meet its debt obligations.

Count_Dante

'Since no new money has been created, in fact a whole load of debt money removed from the economy there shouldn’t be inflationary pressures. People will still be receiving in general the same pay cheques.'

Actually, there will be massive deflation because much of the money has been removed from the economy. Your pay would have to fall massively or you would lose your job. In the Great Depression, there was huge deflation but pay levels tended to stay the same and consequently there was mass unemployment.

1694

Would there be deflation or just 0 inflation. The economy might grind to a hault. As stated though something has to change:

Britain is a house, its income is the rent it collects on its rooms, it owes the bank more than the rent on the rooms is and as it fails to meet the repayments. Becauseof the compound interest the amount it owes each month gets further and further from the amount of rent it brings in. It starts selling the rooms to meet the next repayment, but then has less rooms to rent next month to meet that repayment.

1694

To clarify National debt exceeds, GDP.

If we were taxed this year on 100% of what the nation produced, we would still be in debt. That remaining debt would then gain interest next year, but if 100% of what we produced was taken from us this year what would we use to make pay the remaining debt and the interest added to it?

We can compound this with more borrowing... or find an alternative.

rjm2k1

What a load of tosh, bank goes bust so you don't pay your mortgage off!, cloud cuckoo land!!!

What is interesting however is that ALL of the money owed to the lender will be sold on and collected including the interest, yet only 35k or now 50k of your money is safe and any interest due will be lost! So basically banks have a license to over-lend, swallow up anything over 50k of your savings, go bust and still collect the debts!