Reckless lending got us into this and more will get us out?

Graham_Devon

Rochdale_Pioneers wrote: »

Wookster seems unable to tell the difference between (a) reckless lending and (b) any lending.

Anyone got the inclination to explain to him how business works?

When there is no money to lend, it IS reckless lending.

Remember where this money has come from, why it needed to come from where it came from, and what in the first place, created that need for that money.

Wookster

Rochdale_Pioneers wrote: »

You keep frothing about how broken Britain is. Ban all lending and just you see what broken really looks like. If of course this ISN'T what you're saying then why not spell it out in black and white - how much lending is OK to the Wookster?

There you go, twisting my words, yet again. Master of 'spin'.

Two points for you to note:

1. In a recession, the cost of credit increases as the risk of default increases. Can I ask you to look at the link I posted above in light of this?
2. It is patently obvious that households and corporates have taken on too much debt. Surely even you can see that you cannot borrow your way out of debt?

chucky

thriftybabe wrote: »

I agree. As much as I hate to say it I think the Government are doing the best they can in a very, very difficult situation. The country would literally stop without this. It has to be done whether we like it or not.

this what a lot of these people miss.

probably because they expect to do well out of others misfortune or they're revelling in seeing others in financial difficulty. pretty sad either way.

Arcaine

Graham_Devon wrote: »

When there is no money to lend, it IS reckless lending.

Remember where this money has come from, why it needed to come from where it came from, and what in the first place, created that need for that money.

I agree with you to a point, how far do you let business slump and tax revenue slump before taking action. After all each failed business means less tax revenue not just from Corporation tax on the business, VAT, rates, employee taxes, and also state benefits for the unemployed. So the question for the Government becomes, can I borrow today and lend to Business to protect future tax revenue. I would argue, as always, that only profitable business should qualify.

Graham_Devon

Rochdale_Pioneers wrote: »

So essentially, you're arguing that no banks should be lending money to anyone because in the crisis we're in its an unforseen risk.

So essentially? LOL.

So wookster lays out exactly what he means, and you turn that into "everyone".

I'm not batting for Wookster here. However, I find your arguments amazing. And your ability to turn an explanation around into what suits you up there with the best of the spin masters.

cogito

Rochdale_Pioneers wrote: »

You have a funny definition of "rant and rave". But hang on, here comes yours:



So essentially, you're arguing that no banks should be lending money to anyone because in the crisis we're in its an unforseen risk.

You keep frothing about how broken Britain is. Ban all lending and just you see what broken really looks like. If of course this ISN'T what you're saying then why not spell it out in black and white - how much lending is OK to the Wookster?

Aren't we in this crisis precisely because of unforseen risks?

nickmason

chucky wrote: »

this what a lot of these people miss.

probably because they expect to do well out of others misfortune or they're revelling in seeing others in financial difficulty. pretty sad either way.

No - I think when they miss that point it's because of the injustice of it all. It is hard to believe or accept that it is fair that to get us out of trouble we need to reward those risk-takers who got us here in the first place. Frankly, I can't help but feel that it's wrong, however much I try and be rational about the economic strategy.

Longer term, this is the moral hazard problem - what does it do when we tell people that because it was tactically right, we'll bail out risk-takers at the expense of savers? It encourages more speculation down the line.

The sophisticated argument is that it is this moral hazard that suggests that maybe Brown's short term fix isn't worth it. Obviously no one can account for the moral hazard, so it returns to being a normative argument rather than a simple accounting one.

Pobby

On the other side of the coin however the reality in my industry is this. Over the last 10 years more and more people have piled in and become retailers and wholesalers. It`s an industry driven by fashion and in part new technology. Having spent 35 years in it I know just how hard it is to make a profit.

A lot of the newcomers are hobbyist trying to make a living with little or no understanding of our very difficult industry. No surprise that so many are now closing or being forced to close. I can understand the banks not wishing to support them.

The real problem is that the banks are also not supporting the well established companies.

beingjdc

What people have missed is that as of January 2009 we are, as a nation, in *more* mortgage debt than we were in January 2008. Despite the so-called credit crunch we have continued to borrow more than we have paid back. Meanwhile of course the notional value of our assets has fallen hugely, so our LTV as a nation has gone up.

To suggest that another £65bn needs pouring on the fire is reckless by any standards, and the 'crowding out' effect means that the more is borrowed by people buying homes, the less is available for productive industry (unless those selling homes decide to invest in the UK, rather than buy another home, emigrate, or buy a load of imported tat).

Rochdale_Pioneers

Wookster wrote: »

2. It is patently obvious that households and corporates have taken on too much debt. Surely even you can see that you cannot borrow your way out of debt?

So what are you suggesting? keep lending at the levels its fallen to and accept the mass bankruptcies and job losses? Cut it further and increase the effect?

Its all very well saying "too much debt". But efficient profitable businesses often have to borrow to invest - take that away and they stagnate and decline. In some cases this takes a few years - MG Rover's failure to invest in new cars for example - in others it happens quickly as cash flow dries up and quickly become a fatal crisis.

Noone is suggesting a return to 125% mortgages and borrowing billions on the global wholesale market to lend to dam construction projects in Arabia. But to stop lending completely is a surefire way of killing an economy dead. There seems to be a phalanx of economists all around the world looking at the problem of lack of credit killing demand killing industry and how to get credit and demand moving again. Once again you position yourself at odds with the reality on the ground and with the consensus about what is wrong.

I'm surprised you're not up for this proposed Global Finance Regulator job - as you're patently far more clued up than everyone else you should be a shoo-in.