BBC Newsnight: Hugh Hendry: "I Would Recommend You Panic"

sabretoothtigger

tomterm8 wrote: »

However, the fact he proposed that letting the entire banking system fail, and everyone be wiped out would lead to a 3 year recession, and then everyone would be fine, makes him wrong.

Very wrong.

3yr is still a long time. They dont literally knock down the banks or kill off the workers but destroying the bad debt involved would most likely produce a shorter recession as capital could be allocated to productive ventures instead supporting housing speculation or whatever

Obviously its not at zero cost, bond lenders would most likely become more cautious about giving money to risky ventures.

The main reason government wont allow that is because it needs a buoyant debt market itself or they'd be forced to cut spending if uk gilts became questionable

The longer its left, the worse it will be when it happens anyway. Im pretty sure governments cant create an economy.
The main point often made is governments have to spend to create jobs but this appears to be a fallacy when government is not a business but a tax on business and otherwise productive income

treliac

1984ReturnsForReal wrote: »

You remind me of Bruce Willis in Armageddon.

:A


:rotfl:

Maybe I would..... if I'd seen it and...... if I was a man. Is there a female version of this character?

tomterm8

sabretoothtigger wrote: »

3yr is still a long time.

No, actually it isn't. When Weimar germany's banking system failed, it took them 20 years to get back to anything like normality. When the US banking system failed in the great depression, it took 30 years.

The historical examples of a banking system failure are very scary.

Whereas, the historical exampless of a systemic banking crises being resolved by governments which don't allow complete failure, are actually nowhere near as bad.

sabretoothtigger

That'd be a depression then and involve ongoing mistakes in policy. That situation resembles supporting a collapsing situation rather then a recession caused by default I think



The bottom line in all this is that we cant afford to carry all bad debt as if it were good.
This is probably why the situation is so persistent.

When the Colombia guy says they have taken the austerity action thats not really correct because the plan still involves them spending more money then they have incoming.

Austerity to me is when the cupboards are bare and you skip a meal to save money because there isnt any happy solution. Millions of people have to do that every day in the real world so the real problem is governments or whoever unwilling to take real actions hence it will keep happening


France has had a budget deficit every year for decades so its all ongoing.

Two solutions I think would be to print the money to pay every bill or cancel debt of failed enterprises and/or sell their assets to pay the bills.
Greece just has to sell off a few outlying islands, they dont actually need a bailout its just not the nicest solution. Markets dont do nice










http://www.bbc.co.uk/iplayer/episode/b00skxhl/Newsnight_26_05_2010/