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

SGE1

Wookster wrote: »

http://www.guardian.co.uk/business/2009/feb/24/banks-toxic-assets-insurance

Does Crash ever learn? I'll wager that ultimately the taxpayer ends up carrying the can for this.

Don't you think you're being a bit simplistic? Lending is like medicine (kind of). A bit of it is OK - if you overdose on it, it's not, but you're likely to need more of it to recover.

The world doesn't run in black and white, "lending bad!", "saving good!" isn't accurate.

Pennywise

Pobby wrote: »

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

The real problem is that the bank staff are now so dumbed down that they don't know how to differentiate between a dead duck and a potentially successful business. That skill is the main casuality of the last couple of decades with the introduction of "the computer says no" mentality.

SGE1

Wookster wrote: »

This is a prime example of exactly the sort of lending anyone should steer far clear of. How long do you think it takes to develop a new car? I'm no engineer but I'd guess over 5 years. Are you seriously suggesting that the tax payer should finance this sort of activity?

MG Rover should have been developing new models as a matter of course. It didn't and therefore failed. That's the way capitalism works unless you want to keep propping up failing businesses indefinitely.



Well it seems a return to 90% mortgages is back on the cards. Northern Rock has been instructed to offer "market leading" products at the behest of Crash. AFAIK 90% mortgages are quite rare these days, do you think its right to be so bullish with tax payers money? Especially in a falling market?

(more info here: http://www.independent.co.uk/news/business/comment/jeremy-warner/jeremy-warner-ninety-per-cent-mortgages-courtesy-of-the-taxpayer-1630413.html)

Reckless is the word that comes to mind.

You're making Rochdale's point for him - you say Rover should have developed new models - they chose not to, and went under - but the point is that in order to remain proactive, and for example design new models, you need to invest, and therefore you're likely to need to borrow. And if you don't even have the option to borrow, how can you invest? It's bad enough for businesses who have seasonal cash flows.

Wookster

SGE1 wrote: »

You're making Rochdale's point for him

Not at all. My point is that that sort of risk should not be carried by the tax payer. It is quite impractical for the tax payer to carry that sort of risk (i.e. funding development of a new car range).

Rover should have planned for a new range. They didn't. This shows it was managed poorly and needed to go under.

beingjdc

SGE1 wrote: »

Don't you think you're being a bit simplistic? Lending is like medicine (kind of). A bit of it is OK - if you overdose on it, it's not, but you're likely to need more of it to recover.

Agreed - and most medicines taken to excess are poisons. But if someone comes to hospital having overdosed massively, you gradually reduce the amount of the poison in their system, you don't pump more and more in!

Our debt, the poison, is still growing. It is growing less quickly than before, but growing all the same. We need it to fall. We may be able to make the next year seem better by drugging ourselves some more, but only at the cost of worse withdrawal symptoms later.

Rochdale_Pioneers

Rover did not "choose not to" develop new models. They had prototypes and various design studies for replacements of their 25 and 45 ranges which were aging badly. What they didn't have was the money to turn them into actual cars.

And with the car industry specifically its not a free market. We can choose to not invest in it. We can watch our factories close for good. We can watch the jobs and investment and business go abroad as the French and Germans invest heavily in their industries.

Then we can listen to the same people who demand no investment go to industry then bemoan the fact that we have no industry left. Funny thing this free market - you try and compete with heavily subsidised competitors when you have no subsidies of your own and you go bust very quickly. European subsidies are an established fact. If we want an indutsrial base - and the right-whinge have complained loundly that Labour have let it go to the wall - then that means cash subsidy to compete with their cash subsidy.

nickmason

I asked the other day about government subsidies and EU reg's - that once upon a time accusations were levelled against the French for anti-competitive behaviour, and yet now it seems commonplace - no one answered. JDC - you must know, surely? Has something changed in the legislation, or was the initial premise flawed?

ad9898_3

SGE1 wrote: »

Lending is like medicine (kind of). A bit of it is OK - if you overdose on it, it's not, but you're likely to need more of it to recover.

I've heard some cac in my time but this takes the biscuit, so it goes like this...

You goto the pub, you have a drink,
You keep drinking,
You drink until you're sick,
You keep drinking until you get alcoholic poisoning,
You wake up the next day, barely alive,
You then say 'go and have another drink ????'..... !!!!!!?

Utter nonsense, but thats Gordonomics for ya.

ad44downey

ad9898 wrote: »

All I can say is when a bubble has burst, it's futile to try and repair it, then try and inflate it again,

Or when you're in a hole, STOP digging.

Are you listening Gordon Clown?

SGE1

ad9898 wrote: »

I've heard some cac in my time but this takes the biscuit, so it goes like this...

You goto the pub, you have a drink,
You keep drinking,
You drink until you're sick,
You keep drinking until you get alcoholic poisoning,
You wake up the next day, barely alive,
You then say 'go and have another drink ????'..... !!!!!!?

Utter nonsense, but thats Gordonomics for ya.

Er, no, the analogy with medicine works because of the similar "good in small doses" attribute. Unless you're arguing that alcohol is healthy, I'm afraid you've missed the point.