Systemic Insolvency, Liquidity Problems

Generali

http://www.gutenberg.org/files/98/98-h/98-h.htm

It was the best of times,
It was the worst of times,
It was the age of wisdom,
It was the age of foolishness,
It was the epoch of belief,
It was the epoch of incredulity,
It was the season of Light,
It was the season of Darkness,
It was the spring of hope,
It was the winter of despair,

The more I see about what is going on around us the more I think that the current problems are being inflicted by a misguided attempt to shore up the Western middle classes.

We are living in the best of times: medical improvements that have dramatically increased expected life spans are increasingly adding quality to quantity of life; I can watch videos near instantly to decide if I think that Puskas* or Raul is the better Spanish striker and I can read almost any book ever published if I so choose; I can feed and clothe my family from about 7 hours work a week.

Yet we also live in the worst of times: by some measures, economic times are worse than in the 1930s; we see riots across Europe that have left several people dead with more riots (quite possibly) to follow; extremist parties are on the rise and Governments are falling across Europe.

Why are we living through this? IMO it's because taxpayers are bailing out savers. As most Governments in Europe and the US are taxing as much as is politically possible they are having to cut payments to poor people to allow savers to retain their capital. As there are more poor people than rich people that means the majority are being p1ssed off to keep the minority happy.

Ultimately, which is better? Austerity to repay middle class and rich savers or insolvency to wipe out the creditors which includes your cash savings.




*Puskas became Spanish and played 3 matches in a Spanish shirt.

ILW

All should be encouraged to save.
I believe it is part of self sufficiency, which I also believe is a good thing.

Generali

ILW wrote: »

All should be encouraged to save.
I believe it is part of self sufficiency, which I also believe is a good thing.

Even at the expense of systemic collapse?

ILW

Generali wrote: »

Even at the expense of systemic collapse?

A lack of savings is a major part of the problem.

Joe_Bloggs

What motivates savers to save? Surely it is partly the fear of not doing so. Savings are a crutch to lean on when things go from bad to worse. If you have more than £6000 (below 60 years) you are assumed to earn £1 for every £250 above £6000 each week on income accessed benefits (an interest rate of 23% per annum). Hence there is an increased incentive to save once you have savings.

Could it be that the problem with savings is that this money is stuck in banks. They want usurious rates /terms and conditions to lend to those who could employ people and generate wealth however they rebuild their balance sheets whilst the economy stagnates.
J_B.

ILW

Generali wrote: »

http://www.gutenberg.org/files/98/98-h/98-h.htm





Why are we living through this? IMO it's because taxpayers are bailing out savers. As most Governments in Europe and the US are taxing as much as is politically possible they are having to cut payments to poor people to allow savers to retain their capital. As there are more poor people than rich people that means the majority are being p1ssed off to keep the minority happy.

Is there any natural reason why "poor" people should get payments.

Not sure what that refers to.

CLAPTON

high inflation
low nominal saving rates
negative 'real ' savings rate
low annunities

It's not entirely clear to me how savers are being baled out.

One of the wonders of the period we live in is that the Greek people can collectively refuse to pay their debts and/or can choose if they want to to start paying their taxes; this is without violence or bloody revolution.

the best of times

HAMISH_MCTAVISH

ILW wrote: »

A lack of savings is a major part of the problem.

The banks lost your savings already.

They're gone.

And the irony of it is, they mostly didn't lose them by lending them to British borrowers, either businesses or mortgages.

UK banks lost 15 times more on overseas mortgages than they did on UK ones.

And 75% of the rest of the banks’ losses were from their non-UK lending books.

Now you expect the rest of us, taxpayers, to bail you out for your poor investment decisions,( ie, you lending your money to an institution, your bank, that became insolvent) by covering your losses.

Why?

Generali

CLAPTON wrote: »

It's not entirely clear to me how savers are being baled out.

I'll try to simplify things for you.

These people wanted their savings back:



As the bank concerned was unable to repay, the money came from this lot:



As you can see, they gave the shirts from their backs.

ILW

My point is that I believe people should be encouraged to carry a certain amount of savings to allow for some of lifes ups and downs. (Rather than always expecting the state to pick up the pieces). By ensuring a "safe" place to keep them this should encourage this behaviour, thereby decreasing the amount of state assistance required. Seems pretty fair to me.

If you prefer a system which believes in running to the benefits offices as soon as you suffer a small change in circumstances, fair enough.

HAMISH_MCTAVISH

ILW wrote: »

By ensuring a "safe" place to keep them this should encourage this behaviour, thereby decreasing the amount of state assistance required. Seems pretty fair to me.

Then they really shouldn't complain when that safety mechanism kicks in to prevent them losing everything.

Savers would have lost all their money had the taxpayer not stepped in to bail them out.

Part of the price of getting to keep the money is low interest rates.

You seem to think that low rates are bailing out borrowers, who would otherwise default. If that's true, then it's not borrowers being bailed out at all, it's savers. Because if they default, then you lose your money that the banks lent them on your behalf.

Or in other words, you should be more worried about the return of your capital, rather than the return on your capital.