When do UK banks no longer become viable?

dundledots

Hello all,

I have just seen the news reports stating that the tax payers will now be paying to insure our own money (the banks).

I believe the uk was meant to be a capitalist country where you rise and fall with the economy and not the communistic way of using reserves to bail out minorities companies (I do however, fully understand that a car industry worker would not like my question).

I'm not too savvy on the investment side but if interest rates are super low and inflation means we are losing money by having it in our banks and then we are to pay with our money to insure our banks, then there must be a point where we need to remove all of our money and put it elsewhere where it is not mis-managed.

Maybe I have it wrong but if this is the case at what point should the population say "no more" and remove their money from the hands of the UK Banks/government?

So:

1, Should (could) the people start our own treasury/bank and all who pay into it has their money turned into gold/silver etc?

2, Should we put it into developments outside of the uk where the government cannot touch it (I don't know what sort of developements so your suggestions are welcome)?

3, Should we be taking to the streets to say no to the goverment using our money to send ships to sort other countries problems, bailing out car industries and other non-essential areas etc?

Please don't flame me as I am only throwing ideas around and am not trying to offend anyone. I hope we all come through this mess!

I look forward to your views.

Regards
Steve

P.S. I am not an anachist either and am not trying to kick start a revolution

altocumulus

I doubt the banks have sufficient ready capital to pay all depositors their money back - so at some stage they will stop paying our own monies back to us and that will lead directly to .....

Aegis

dundledots wrote: »

Hello all,

I have just seen the news reports stating that the tax payers will now be paying to insure our own money (the banks).

Think of it more like paying to ensure the stability of our financial system as best possible and you'll probably feel better about it.

I believe the uk was meant to be a capitalist country where you rise and fall with the economy and not the communistic way of using reserves to bail out minorities companies (I do however, fully understand that a car industry worker would not like my question).

I agree, which is why I support the plans that the government has to offer the money to the banks only in exchange for part-nationalisation, meaning that in a few years time the rescued banks will be forced to pay the government a hefty percentage of future dividends. It also means that the government itself has the option to sell the part it owns back at some point, increasing capital.

It's in everyone's best interest to keep banks trading, but this seems like a very fair way to offer money to troubled institutions without annoying the tax payers more than necessary.

I'm not too savvy on the investment side but if interest rates are super low and inflation means we are losing money by having it in our banks and then we are to pay with our money to insure our banks, then there must be a point where we need to remove all of our money and put it elsewhere where it is not mis-managed.

If you took your money out of the bank and put it elsewhere, you would lose the ease of access and the guarantees on the capital (FSCS and the fact that it's guaranteed by the bank not to reduce in amount). Do you have anywhere else in mind for a savings account at the moment?

Maybe I have it wrong but if this is the case at what point should the population say "no more" and remove their money from the hands of the UK Banks/government?

If this ever happened it would cause a run on the banks, resulting in all of them having to either close or be fully nationalised. This would itself further ruin the banking system in the UK, and might cause a lot of trouble for the markets and savers/investors in general.

I really wouldn't recommend it unless you have somewhere else to go, as currently the banking system is the only system in the UK which allows actual banking (i.e. standing orders, direct debits, etc) and causing it to crash would be bad.

So:

1, Should (could) the people start our own treasury/bank and all who pay into it has their money turned into gold/silver etc?

Not a good idea. Commodity investing is high risk, and the volatility would mean that deposits would fluctuate in value a lot. Good as part of a balanced portfolio of assets, but not so great if you're looking for a short-term home for your money.

New banks could feasibly start, but you'd more or less have to model it on the old system. I.e. taking in numerous deposits and lending out/investing in a way that allows you to meet your outgoing interest obligations and the amount of money you expect to be leaving from withdrawals.

2, Should we put it into developments outside of the uk where the government cannot touch it (I don't know what sort of developements so your suggestions are welcome)?

If you want to lose your £50k protection under the FSCS, you could invest in banks outside the UK. However, if your account isn't denominated in Sterling you then include currency fluctuation risk and extra costs for actually using your money in the UK.

3, Should we be taking to the streets to say no to the goverment using our money to send ships to sort other countries problems, bailing out car industries and other non-essential areas etc?

That one's fine. The right to protest is very much a part of modern society. Unfortunately the government seems to have the right to ignore protests...

For the record, I generally agree that simply throwing money at a failing company is bad. The taxpayer should definitely get something back when that happens, which is why I support the way that the banks are being offered money in exchange for part nationalisation.

Please don't flame me as I am only throwing ideas around and am not trying to offend anyone. I hope we all come through this mess!

Please don;t take this as flaming

dundledots

Hi Aegis,

Thanks for the replies.

It's pretty much what I thought the answers were.

It's very frustrating when every person I speak to seems to know the right common sense answers to issues I see on TV but it never seems to come about from governments.

I expect that one day the whole system will collapse but hopefully not this time round as the powers that be do not have the brains to sort it out....

Thanks again

RayWolfe

Interesting first posting on a money saving site!
Got any ideas about who is offering the best interest rates for my ISAs or where I can buy Persil more cheaply?

dundledots

Hi RayWolfe,

Not sure about the ISA's (except the tax free bit must be a trade discription issue as the amount saved is being chucked away by the interest/inflation rates?)

To save on persil, up the temperature of a wash whilst reducing the amount of persil you put in should make the cost per load lower (enzymes work better over a certain temp - 40 degrees? - I read somewhere).:rolleyes:

Andrew64

This gloomy article makes interesting reading about the current situation. Makes you wonder if we should all buy safes and keep some of our savings at home!

http://www.guardian.co.uk/commentisfree/2009/jan/18/recession-banking

Unless we are decisive Britain faces bankruptcy

"Ireland made the same bet, and on Friday the government had to nationalise its third biggest bank - Anglo Irish. Like the Icelandic banks, it had been speculating in Britain's property bubble. The joke across the Irish sea is that the only difference between Ireland and Iceland is one letter and six months. But there is another, more crucial, difference. Ireland is in the euro; otherwise, like Iceland, it would be bust.After what happened to the world's banks last week - and to Barclays Bank in particular, whose share price collapsed 25% in an hour on Friday - it's clear that Britain is at risk of being next in line. We too have a banking system that is huge in relation to our GDP, but, like Iceland, we are not in the euro. Unless we act quickly, decisively and cleverly, the difficulties of our banks could overwhelm us, triggering an enormous run on the pound. Britain, in short, risks bankruptcy."

dundledots

Aegis's reply has got me thinking:

"For the record, I generally agree that simply throwing money at a failing company is bad. The taxpayer should definitely get something back when that happens, which is why I support the way that the banks are being offered money in exchange for part nationalisation."

Could the people not force the nationalisation of the banks by applying the same tactic as mentioned to address the petrol price issue?

By this I mean every customer who is with say RBS (I'm only saying RBS as I am a customer and it was the first name in my head) take all their money out into another bank (not in the same umbrella group) until the bank is in the same state as Northern Rock?

Then RBS could be taken over by the government (expelling the management who caused the problems) and nationalised.

Once done the customers of other banks then switch over to RBS thus forcing their old banks to go the same way.

I've asked around and it looks like setting up a bank account takes up to around 12 weeks (ironing out any setup issues). So in 6 months of agro to the people there would be a more secure system?

Then make all the management criminally liable for any mis-management so that they run the system to their best ability.

Once the banks make a profit after the recession out bail out debt get's paid back to the public (I would accept a tax cut ot a nice cheque:rotfl: ).

Reaper

dundledots wrote: »

Then RBS could be taken over by the government (expelling the management who caused the problems) and nationalised.

You'll be pleased to hear the senior management have already resigned. Sounds like Hampton (Sainsburys chairman) is going to be given the top job.
The government already owns more than 50% of the company.

withnell

dundledots wrote: »

Then RBS could be taken over by the government (expelling the management who caused the problems) and nationalised.

What about all the investors? Not just the mega rich, the ones with pension funds with investments in RBS, and with small investments of what they've managed to get together through years of hard graft.....

Aegis

dundledots wrote: »

Aegis's reply has got me thinking:

"For the record, I generally agree that simply throwing money at a failing company is bad. The taxpayer should definitely get something back when that happens, which is why I support the way that the banks are being offered money in exchange for part nationalisation."

Could the people not force the nationalisation of the banks by applying the same tactic as mentioned to address the petrol price issue?

By this I mean every customer who is with say RBS (I'm only saying RBS as I am a customer and it was the first name in my head) take all their money out into another bank (not in the same umbrella group) until the bank is in the same state as Northern Rock?

Then RBS could be taken over by the government (expelling the management who caused the problems) and nationalised.

Once done the customers of other banks then switch over to RBS thus forcing their old banks to go the same way.

I've asked around and it looks like setting up a bank account takes up to around 12 weeks (ironing out any setup issues). So in 6 months of agro to the people there would be a more secure system?

Then make all the management criminally liable for any mis-management so that they run the system to their best ability.

Once the banks make a profit after the recession out bail out debt get's paid back to the public (I would accept a tax cut ot a nice cheque:rotfl: ).

Think through the consequences of doing this...

I can pretty much guarantee that you wouldn't just be looking at a nice simple transition of banks from investor-owned to nationalised, and you'd have other effects to consider, like the huge drop of the FTSE, the lack of competition between organisations for mortgages and savings accounts, the international ramifications of a total collapse of our banking system, and a whole host of other effects that I can't think of off the top of my head.

All in all, it doesn't really sound like the best of ideas...