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The default delusion: Inevitable & desirable
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with the knowledge we have now, then I would not put any money in the bank unless the government guarenteed the money as I believe that most UK banks are hiding massive bad debts and I believe most rational people would do likewise
This is the point. Banks believe they can make risky loans safe in the knowledge that domestic savers will continue to save with them.
I don't know of a perfect solution, but I do believe that if banks carried a risk then savers would act as consumers and seek out saving institutions which match the risk profile they personally want. In turn, banks might have to consider how they attract savings.0 -
Mattress it is then.I don't know of a perfect solution, but I do believe that if banks carried a risk then savers would act as consumers and seek out saving institutions which match the risk profile they personally want.
Borrowers' need to borrow is much greater than savers' need for interest - as shown by the fact that most of the savings on deposit are earning next to nothing. People keep their money in the bank because they reckon it's safer than keeping it in the house.
The need for finance for mortgages and business is only going to be met by providing savers with a government guarantee."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 -
Perhaps not, but perhaps I would've taken a greater interest if I thought my savings were at risk?
given that all the masters of the universe, governor of the BoE, equivalent in USA and every developed country in the world plus thousands of financial analysts all over the world missed the financial meltdown, do you truely think that ordinary people are capable of spotting the next financial meltdown ?
No, the vast majority would opt for national savings or the mattress.0 -
given that all the masters of the universe, governor of the BoE, equivalent in USA and every developed country in the world plus thousands of financial analysts all over the world missed the financial meltdown, do you truely think that ordinary people are capable of spotting the next financial meltdown ?
No, the vast majority would opt for national savings or the mattress.
It isn't about spotting the meltdown. It's about choosing a bank that has a reputation for being safer, which banks like Nationwide have had. Maybe I'm being naive, but I think it would create space in the market for banks that advertised the fact that all they did was bog standard savings and mortgages, and didn't dabble in complex instruments.
I think when pretty much everyone's savings are covered there's a moral hazard, just as when the banks themselves believe they'll be bailed out.“I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse0 -
It isn't about spotting the meltdown. It's about choosing a bank that has a reputation for being safer, which banks like Nationwide have had. Maybe I'm being naive, but I think it would create space in the market for banks that advertised the fact that all they did was bog standard savings and mortgages, and didn't dabble in complex instruments.
I think when pretty much everyone's savings are covered there's a moral hazard, just as when the banks themselves believe they'll be bailed out.
Lloyds was considered a a totally boring safe bank but was only saved by a massive injection of government cash let alone the savings guarentee.
In my view Nationwide was on a knife edge (all those mortgages with no 'collar') and only saved by the certainty the government would bail out we ordinary savers.
I would say if there was even a suggestion of the government withdrawing the savers guarentee the BSs and banks would be wiped out in a few days.
I'm sure they wouldn't even consider it.0 -
And yet small building societies fail much more often than big banks.I think it would create space in the market for banks that advertised the fact that all they did was bog standard savings and mortgages, and didn't dabble in complex instruments."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 -
Just make the announcement which should have been made in the crunch.
"Let the private banks fail"
Why the state should bail out private institutions is beyond me. Yes, savers would lose money, but then savers don't complain when their savings are earning interest do they?
Clapton at post 8 makes the point but in addition:-
Depositors are just that they are merely placing their money somewhere "safe" for which they may get amodest return to encourage them and in recognition that the institution can make a return on their money as a Bank.
The return the depositor gets is in know sufficient to warrant capital risk.
Shareholders risk their capital by seeking to make a gain both in capital and dividend.
I have a VI as I am both."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
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Thrugelmir wrote: »Governments are in a far worse positions than the banks.
But the UK government can print more money.0 -
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