Government to offer loans to buy cars

purch

I believe the latest plan on the table is to relax the capital adequacy requirements so the banks can loan more

Looks like they've run out of unleaded, and are now using Kerosine to put out the fire !!!!!!!!! :eek:

WTF?_2

StevieJ wrote: »

Let us start with a positive GDP and people moving back into jobs again :T

Boosting GDP isn't going to be any easier if people are burdened for decades with high taxes to repay all the debt the government are currently taking out in order to loan money back to ourselves.

Nor is the fact that people are seeing their savings eroded though price increases (reduction in spending power thanks to a failing pound) and low interest rates going to help them have the confidence and affluence to spend money and boost the economy that way.

And all the government plans seem to be based on the assumption that this recession is going to be relatively short, if steep. Voices now beginning to warn about a long-haul slump which if true is going to leave us in a bloody disastrous position with all the borrowing we are doing now.

Graham_Devon

StevieJ wrote: »

I am not a Labour voter but I am getting sick and tired of the a Tory mob blaming Brown for US / UK banks ineptitude, especially when the effects are crushing the whole world. I find it even more galling when your own party comes out with statements like this.

'We see no need to continue to regulate the provision of mortgage finance, as it is the lending institutions rather than the client taking the risk.'

You must be a labour supporter.

You asked me a question and I answered.

I asked you a question and you totally sidestepped and ignored it, spun it, and had a stab at the tories...probably with a smirk on your face.

Sir_Humphrey

Wookster wrote: »

It is simply recycling of money.

Of course it is about getting money circulating. If you spend a fiver, someone else spends that fiver and so on. Economists call the rate of this process the velocity of money. Money is primarily a medium of exchange to make trading easier. Perhaps it is crazy, but this money go round is how Capitalism works.

Wookster wrote: »

Where does growth come from? Who produces goods of value?.

No goods are produced if there is no demand for them. So for productive goods to be produced, you need to create the demand.

Wookster wrote: »

And you are still not seeing the lunacy with trying to borrow your way out of debt.

There is a big difference between individuals borrowing, and govt or business borrowing. If an individual borrows for consumption, the individual does not increase his/her wealth, as the good depreciates (unless it is house which in the long term have increased about 1% above earnings on average). If a company borrows to invest, then the return on that investment helps to repay the loan (if the company makes a duff investment then they go bust instead - avoiding this is the job of a bank loans officer).

If companies are unwilling or unable to do this, then govt have to step in get the demand ball rolling again. The cost of this is partly met by increased taxation in the longer term, mitigated by the fact that greater growth allows the same tax revenue at a lower tax rate. Now in fact the govt is not doing much of this demand-led boosting, which is why their measures are not working very well at the moment. Most of the money spent so far has been to prop up the banks, who are not passing on the money as loans.

You need to see the difference between individuals borrowing to consume (usually stupid) and companies/govts borrowing to invest (usually good).

Generali

Sir_Humphrey wrote: »

You need to see the difference between individuals borrowing to consume (usually stupid) and companies/govts borrowing to invest (usually good).

And giving money to banks and car companies is investing! :rotfl::rotfl::rotfl::rotfl::rotfl:

Sir_Humphrey

Generali wrote: »

And giving money to banks and car companies is investing! :rotfl::rotfl::rotfl::rotfl::rotfl:

Passing the money on to banks no. But I think the economic situation is better without having had the banks and everyones savings wiped out, no? And providing money to car companies allows R&D, so of course it is investment.

The issue is that it does no go far enough. The weakest banks need to be nationalised, and a far bigger fiscal stimulus applied. The latter is being done by Obama, provided he can get it past the dino-Republicans.

Wookster

Sir_Humphrey wrote: »

No goods are produced if there is no demand for them. So for productive goods to be produced, you need to create the demand.

What happens when there is too much debt in the economy?

Sir_Humphrey wrote: »

If companies are unwilling or unable to do this, then govt have to step in get the demand ball rolling again.

Why do you think companies might be unwilling to do this?

Sir_Humphrey wrote: »

Most of the money spent so far has been to prop up the banks, who are not passing on the money as loans.

Isn't part of the problem that the banks lent foolishly and now they want to repair their fractured balance sheets? If you think the lending that occurred in a growth environment, where risks are significantly lower, has proven to be foolish (with the benefit of hindsight) then what do you think about lending now in a recessionary environment? How are you sure that lending won't be shown to be reckless with the passage of time?

Sir_Humphrey

Wookster wrote: »

What happens when there is too much debt in the economy?

Why do you think companies might be unwilling to do this?


Isn't part of the problem that the banks lent foolishly and now they want to repair their fractured balance sheets? If you think the lending that occurred in a growth environment, where risks are significantly lower, has proven to be foolish (with the benefit of hindsight) then what do you think about lending now in a recessionary environment? How are you sure that lending won't be shown to be reckless with the passage of time?

The banks have failed in providing loans, as the loan officers did not do their job properly (as well as load of other errors). However, lending need to continue one way or another, otherwise the economy will collapse. If the banks do not lend to sound companies (see the Alan M thread) then they collapse, wiping out more wealth, increasing bank losses until the economy hits a death spiral. This is called debt deflation and it has to avoided at all costs.


I am surprised that people on this board are against measures to boost employment. Do they think they are immune from unemployment?!?

Wookster

Sir_Humphrey wrote: »

The banks have failed in providing loans, as the loan officers did not do their job properly (as well as load of other errors). However, lending need to continue one way or another, otherwise the economy will collapse. If the banks do not lend to sound companies (see the Alan M thread) then they collapse, wiping out more wealth, increasing bank losses until the economy hits a death spiral. This is called debt deflation and it has to avoided at all costs.

You are not answering my question.

If you regard the lending that occurred in the last 10 years as reckless, what is different about lending now, when the risk of default is higher?

Why won't it be reckless?

JayScottGreenspan

Sir_Humphrey wrote: »

If companies are unwilling or unable to do this, then govt have to step in get the demand ball rolling again. The cost of this is partly met by increased taxation in the longer term, mitigated by the fact that greater growth allows the same tax revenue at a lower tax rate. Now in fact the govt is not doing much of this demand-led boosting, which is why their measures are not working very well at the moment. Most of the money spent so far has been to prop up the banks, who are not passing on the money as loans.

I agree with this. But I think it's important to recognise that there are good ways to stimulate the economy and that there are also some very 5hit ways to stimulate the economy.

Surely backing car loans is a very inefficient stimulus, with most of the benefit leaking to overseas companies, and with a massive downside when people hand the keys back.

What I want is an honest estimate of how many jobs it will save and how much the defualts will cost us. I'd expect hopelessly optimistic estimates to be behind the governments calculations, if they've bothered to do them at all.