We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Debate House Prices
In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Banking/Sovereign debt crisis PT II
Comments
-
Ok I'm going to be the fool and ask, Why would society collapse if the banking system did? OK it would effect society as we know it now with credit here there and everywhere etc but apart from that?
A complete collapse of the banking system would mean that customers cannot access their funds. This means that debit & credit cards won't work, you can't withdraw cash. You'd be left with only the cash in your wallet (or under your mattress).
How do you buy food?
That is the big scare.0 -
I listened to PM on radio 4 this evening, it was quite scary stuff, it seems to me that once the market smells blood, the whole pack is just waiting for the kill ..
The problem in the markets is simple. Would you lend money to Italy or Spain? Nor would I.
So what do investors (ie you and me) do? We sell any Spanish or Italian debt we hold if we can get a vaguely ok price for it.
The evil speculators are just buyers of assets that are choosing to buy other assets. Ok, there will be plenty of short positions out there but every seller must find a buyer so for every short someone must be long.0 -
A complete collapse of the banking system would mean that customers cannot access their funds. This means that debit & credit cards won't work, you can't withdraw cash. You'd be left with only the cash in your wallet (or under your mattress).
How do you buy food?
That is the big scare.
But that's not what would happen, people are panicking about the unknown is all.
What would happen in reality is that all UK banks would be taken over by the BoE or Government and withdrawal limits put in place to prevent panic buying.
Shortages of things would start to appear quite quickly but the UK exports as well as importing so, for example, medicines made in the UK could be swapped for food from abroad. Ok, you'd not get a new mobile phone this year but nor would you starve.
The UK would have to live within her means which would mean ~£1000 off imports/head. That might mean no new clothes this year or no new PC.
Then gradually things would come back. We have fiat money so the Government can recapitalize the banks at will. Savers would lose a lot most likely but why should the rest of the country bail out the rich? Not much productive capacity would be lost in this process and every country would be doing the same. The biggest losers would be the Chinese and Germans but they shouldn't buy assets if they're not sure that they'll have value!0 -
Interesting the cebr have done some back of the envelope maths and found that Italy is insolvent at any reasonable growth/yield scenario but Spain is solvent- however Eire has demonstrated that apparent fiscal prudence can be wiped out recapitalising the banks.I think....0
-
Interesting the cebr have done some back of the envelope maths and found that Italy is insolvent at any reasonable growth/yield scenario but Spain is solvent- however Eire has demonstrated that apparent fiscal prudence can be wiped out recapitalising the banks.
The problem is that there is no difference between public and private debt any more.
USians couldn't pay back their mortgages so banks across the world couldn't repay their debts to savers and bond holders. The Governments then, in effect, took on the debts of the banks to their savers.
That is the transmission mechanism at work here. Forget about contagion as that already happened. Now the potential problem is mass sovereign default as Governments get dragged in deeper.
That is a particularly unfortunate message for the British sadly as total debts (public and private) are about 500% of GDP IIRC.0 -
Interesting the cebr have done some back of the envelope maths and found that Italy is insolvent at any reasonable growth/yield scenario but Spain is solvent- however Eire has demonstrated that apparent fiscal prudence can be wiped out recapitalising the banks.
Lots of stories coming out re Italy this morning. Tbh I thought it would be Spain first, so Italy coming out so quickly has been quite surprising.
Thank goodness they have the steady hand of Berlusconi on the tiller...Please stay safe in the sun and learn the A-E of melanoma: A = asymmetry, B = irregular borders, C= different colours, D= diameter, larger than 6mm, E = evolving, is your mole changing? Most moles are not cancerous, any doubts, please check next time you visit your GP.
0 -
The argument for the defence would centre around what assets underpinned those debts - in Eire the assets were mostly property which turned out not to be worth nearly as much as the outstanding loans. I would argue that with Spain and Italy although Italy's total debt burden looks worse it may have assets to support the borrowing whereas in Spain there may be a lot more pain to come from property 'assets'. Not sure where Britain lies on the continuum but obviously things are not as bad as the gross borrowing figures suggest as otherwise we would already have been locked out of the credit markets.The problem is that there is no difference between public and private debt any more.
That is a particularly unfortunate message for the British sadly as total debts (public and private) are about 500% of GDP IIRC.I think....0 -
The argument for the defence would centre around what assets underpinned those debts - in Eire the assets were mostly property which turned out not to be worth nearly as much as the outstanding loans. I would argue that with Spain and Italy although Italy's total debt burden looks worse it may have assets to support the borrowing whereas in Spain there may be a lot more pain to come from property 'assets'. Not sure where Britain lies on the continuum but obviously things are not as bad as the gross borrowing figures suggest as otherwise we would already have been locked out of the credit markets.
Solvency for countries usually revolves around the ability to service debt.
Italy has a good industrial sector and a series of corrupt Governments propped up by taxes on industry.
Perhaps insolvency would also bankrupt the crooks.0 -
vivatifosi wrote: »Thank goodness they have the steady hand of Berlusconi on the tiller...
As fine example of English wit!0 -
We've got a central bank that will buy gilts if necessary. At the most critical period, QE was in progress and the Bank was buying gilts as fast as the Treasury was selling them.Not sure where Britain lies on the continuum but obviously things are not as bad as the gross borrowing figures suggest as otherwise we would already have been locked out of the credit markets.
The ECB has finally woken up and entered the eurozone bond markets now. Remains to be seen whether it will do enough to shut out the short sellers."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.2K Banking & Borrowing
- 253.6K Reduce Debt & Boost Income
- 454.3K Spending & Discounts
- 245.2K Work, Benefits & Business
- 600.9K Mortgages, Homes & Bills
- 177.5K Life & Family
- 259.1K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards