General question about the bail outs

INSTRUCTOR_3

So we as the taxpayer have bailed out the banks. How does this work then as I'm not that financially savvy. Firstly did the Government borrow the money from other countries for the bail outs. If not why are there billions sitting in the Governemts bank account. Surely we don't just pay tax year after year and they don't use the money for helping UK residents. They say money is tight and there are cutbacks everywhere (NHS) but they have huge reserves? If we the taxpayer own 70% of RBS then once the shares start going up will each household receive a dividend? I suspect not.

Also I'd be interested to hear from a top ranking bank employee of RBS. Fred Goodwin maybe or similiar to find out how they feel about the position their employer has left shareholders,savers and possibly them in.In the case of Fred clearly he is finacially secure so my question is more to do with his mental state. Is he hiding at home embarrassed to show his face or does he carry on with his no doubt amazing lifestyle without a care in the world

Generali

Some of the money for the bailout is just a promise, cash isn't required at this point. The hope is that if the Government says, "We'll make good the losses of this bank" to depositors then depositors won't withdraw their cash and make the bank go bust.

Some of it is money that the Government forces other people to lend to them. Part of that cash is from people who buy annuities - the annuity providing company is obliged to cover the annuity by buying long-term UK Government bonds (Gilts). The other group (effectively) obliged to buy Gilts is financial companies like banks and insurance companies.

The rest of the money the Government borrows on or behalf is borrowed from investors. These might be individuals or companies and they might be based in the UK or elsewhere.

It looks certain that the UK Government is going to spend £100,000,000,000 more than it takes in taxation this year. That's 100 billion pounds. That's about £3,500 per household that the UK Government is borrowing this year.

I can't help with the RBS bit - I never worked for them, top ranked or otherwise.

beingjdc

INSTRUCTOR wrote: »

So we as the taxpayer have bailed out the banks. How does this work then as I'm not that financially savvy. Firstly did the Government borrow the money from other countries for the bail outs.

Yes, other countries, other countries' banks, uk residents, and pension funds. The Government's net debt is currently £703.4 billion.

Wookster

Generali wrote: »

£100,000,000,000

That is an absolutely mind boggling sum, and it looks SO much bigger than when you say £100 Billion.

Generali

Wookster wrote: »

That is an absolutely mind boggling sum, and it looks SO much bigger than when you say £100 Billion.

I type the noughts to save confusion. To a banker working with very large amounts of 'cash' (numbers on a screen really), £100,000,000,000 is "one hundred yards" not "one hundred billion" for example.

However you or I say it, it's a colossal sum of money.

Including pension liabilities accrued, it would keep the welfare state (including the NHS) and the employees working on it going for a little over a month.

Wookster

Generali wrote: »

Including pension liabilities accrued, it would keep the welfare state (including the NHS) and the employees working on it going for a little over a month.

What's even more astonighing is that the government has incurred about 14% of its entire debt in the current tax year, which isn't even over yet. The words footloose and fancy free come to mind.