why use tax money to then borrow it back?

illgetthere

i know im stupid... but..

why are we using tax money to bail out banks only to then ask for it back to resolve our struggling finances?

why doesnt mr brown the great (ahem) just pay off our existing credit which will then 1. inject the banks with money that is needed and 2. give us spare money to bring spending confidence back.. wont that do the same as injecting it directly??

just a mad thought and i know its not that simple but just a thought.

Andy_L

Conventional economic theory is that, on a (inter)national level, you need to spend your way out of a recession, however on an individual/company basis saving money in a recession is the sensible thing to do.

So if GB et al pay of debts and give out spare money people/companies will tend to save the money rather than spend it, so injecting it with conditions/spending it on capital projects ensures it's used for "recession curing measures"(TM)

In an ideal world the money for this fiscal stimulus would come from reserves, however, unsurprisingly, there appears to not be enough in the treasury's piggy bank & so borrowing, followed by increased taxation is required

PasturesNew

Because not everybody has existing credit to pay off.

Some of us lived within our means, no matter how small they were - and we'd be mightily peed off if numpties peed it up the wall and got it paid off with our money.

Thrugelmir

illgetthere wrote: »

i know im stupid... but..

why are we using tax money to bail out banks only to then ask for it back to resolve our struggling finances?

why doesnt mr brown the great (ahem) just pay off our existing credit which will then 1. inject the banks with money that is needed and 2. give us spare money to bring spending confidence back.. wont that do the same as injecting it directly??

just a mad thought and i know its not that simple but just a thought.

To discharge the banks liabilities the overnment would need to write off a total outstanding debt on the Uk's banks balance sheets amounting to a figure of say £1,000,000,000,000 (one trillion) pounds. This in respect of loans to companies and mortgages.

Even a capital injection of £50 billion, only represents .5% of all lending.

Giving us spare money will not guarantee that it's spent the right way. Also the sums are tiny in terms of the scale of the problem.

carolt

PasturesNew wrote: »

Because not everybody has existing credit to pay off.

Some of us lived within our means, no matter how small they were - and we'd be mightily peed off if numpties peed it up the wall and got it paid off with our money.

But that's exactly what's happening already - numpties over-borrow on mortgages, everyone else, esp savers foot the bill so that their loans are cheaper but savers get no interest.

I'm with the OP - I can't see the difference, personally.

carolt

Thrugelmir wrote: »

To discharge the banks liabilities the overnment would need to write off a total outstanding debt on the Uk's banks balance sheets amounting to a figure of say £1,000,000,000,000 (one trillion) pounds. This in respect of loans to companies and mortgages.

Even a capital injection of £50 billion, only represents .5% of all lending.

Giving us spare money will not guarantee that it's spent the right way. Also the sums are tiny in terms of the scale of the problem.

It's interesting, isn't it.

I read an interview with the CEO or some other bigwig at Next - forget exact job title - who claimed that the VAT drop had cost 15bn and achieved absolutely nothing.

It occured to me that if we just divided that 15 billion among all UK residents, we'd get £250 each - £1250 in my family of 5.

Now that would get me spending!

Just a thought.

carolt

The Daily Mash expressed the OP's point so well, I thought:

http://www.thedailymash.co.uk/news/business/banks-to-lend-you-your-own-money-200810081308/

BANKS TO LEND YOU YOUR OWN MONEY

THE government is to invest £500bn of your money in British banks so they can lend it back to you with interest.

The historic move is being hailed as a lifeline for the financial system as long as nobody asks too many questions.

Julian Cook, chief economist at Corbett and Barker, said: "The government will give your money to the banks so the banks can start lending you that money, probably at around 7% APR.

"Thanks to all the interest you're paying on your own money, the banks will make billions of pounds again and normality will be restored."After a few years of this the government will cash in the bank shares it bought with your money and use the profits to build a huge !!!!ing dome somewhere."

He added: "In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot."

Chancellor Alistair Darling said the decision had been taken in tandem with the banking industry, adding: "They used a lot of dirty words I'd never heard before and one of them had an angry looking dog."

Meanwhile, Emma Bradford, a sales manager from Bath, said: "Why doesn't the government just give my money to me so I can buy stuff from businesses who will then make a profit and put it in a bank?"

But Mr Darling insisted: "Shut up."

Thrugelmir

carolt wrote: »

It's interesting, isn't it.

I read an interview with the CEO or some other bigwig at Next - forget exact job title - who claimed that the VAT drop had cost 15bn and achieved absolutely nothing.

It occured to me that if we just divided that 15 billion among all UK residents, we'd get £250 each - £1250 in my family of 5.

Now that would get me spending!

Just a thought.

But we would all have to lend the money to the Government in the first place. :cool:

carolt

Now - it's our tax money (current and future, and our children's :eek:)they're lending now.

So what's the difference?

WTF?_2

carolt wrote: »

Now - it's our tax money (current and future, and our children's :eek:)they're lending now.

So what's the difference?

Wait until they start printing money - then they'll be almost literally stealing the cash directly from your wallet and your savings (by making it worth less).

Still, if it gets the people who borrowed to live the life of Riley off the hook it's worth it, eh :rolleyes:

illgetthere

i cant see how lending money to greedy bankers only for them to make a killing by relending it seems right.

im sorry but i dont want to bail out the banks. i would rather see the money invested in other areas that havent brought this on themselves.

if i had known that this was going to happen i would have set up a banking institute. what a lovely feeling to know that if you screw up then someone will be there to put you back into a profitable position again.

it all seems so wrong to me..