5 Years And Counting

Generali

The GFC could be said to have started in August 2007 when BNP Paribas prevented withdrawals from certain funds.

5 years on we have bank nationalisations, riots in the streets of Europe, falling GDP, money printing and rising unemployment from very high levels right across the Northern Hemisphere.

I think there is a consensus here and most places that the bank bailouts were a thoroughly good idea but how long a depression would change your mind?

wotsthat

A Decade or so

Generali wrote: »

I think there is a consensus here and most places that the bank bailouts were a thoroughly good idea but how long a depression would change your mind?

I can't help thinking that Northern Rock wasn't as vital to the health of the UK financial system as suggested at the time. If they'd been allowed to go bust we'd at least have a real example of the consequences of not bailing out a bank. Seems, to me, like a lot of money has been spent to avoid embarrassment rather than to support the economy.

A more strategic approach might have been better. NR & HBOS - bust. RBS - bailout.

kabayiri

A Decade or so

Generali wrote: »

...
I think there is a consensus here and most places that the bank bailouts were a thoroughly good idea but how long a depression would change your mind?

Can I substitute thoroughly good idea with knee jerk response?

They had very little time, and very few options; not a sound foundation for good ideas to emerge in my book.

A big sticking plaster can cover quite a wound. It doesn't mean to say you just leave it on, and assume everything underneath is okay.

Loughton_Monkey

A Decade or so

Generali wrote: »

.....but how long a depression would change your mind?

... and how exactly do we measure it?

The use of two successive -ve quarterly GDP figures is used to measure a 'Recession', but by that measure, it could have finished now for all we know!

In the end, it's down to each individual, who will assess when (s)he thinks (s)he is starting to get wealthier again - and feels confident it will continue.

As an early retiree, with a meticulous set of personal accounts, my wealth is 'planned' to diminish. I have assets of £X, with pensions and investment income of £Y, and I spend £Z [Z>Y]

Looking at my figures, and taking my December 2007 Net Worth as a base, this net worth has gone thus for the following 5 years respectively. -8.2%, +13.3%, +2.5%, +0.2%, +1.1%

The last figure is, of course to September 2012, and doesn't include any 2012 house inflation that I may (or may not) assess at year end. Overall, my net worth is +8.0% for the 5 years.

If that's a 'depression' then I am not personally particularly 'depressed'. Particularly as my spending budget has (since 2005) firmly been set at prior year +3% as I originally planned when I retired.

Other people, who are still of working age, will clearly see a different story. Particularly if they have had pay freezes, or, worse, lost their job. Those who rent rather than buy will also have a more depressing situation, since their housing costs diminish, rather than enhance, their net worth.

Generali

Loughton_Monkey wrote: »

If that's a 'depression' then I am not personally particularly 'depressed'.

The plural of anecdote isn't data.

HAMISH_MCTAVISH

Generali wrote: »

I think there is a consensus here and most places that the bank bailouts were a thoroughly good idea but how long a depression would change your mind?

The bank bailouts are not the cause of our current economic malaise. So the answer would be, indefinitely.

But putting that aside for a moment, is this not just a somewhat more elegantly argued version of GD's endless drivel about "we should have a proper crash/recession/etc so we can have more growth in percentage terms (but from a far lower base)"?

Which seems to me like complete and utter b0ll0x.

We had a liquidity crisis, which was allowed to develop into a solvency crisis, entirely thanks to the failure of governments and central banks to act early enough and with overwhelming firepower.

They learned nothing from the Great Depression.

And have ended up spending more than they should have to fix the problem, because they never got ahead of the curve early on.

The problem Gen, is not that they didn't allow the banks to fail, but rather that they did.... The contagion from Lehmans, and to a lesser extent the forced takeovers of banks here in the UK, is still being felt today.

It was an utterly moronic thing to do when an unlimited liquidity facility from day one would have averted the problem from happening at all.

You can trade any business back to profitability, and recover your costs to do so, with enough zero coupon funding and an unlimited timeframe.

Central banks should have facilitated just that. Instead of worrying about moral hazard while the economy burned.

Graham_Devon

Well you could fix every single world issue with your theory Hamish. Wipe out poverty simply by printing money. Stop any potential financial issue ever happening by simply printing money. Give benefits to anyone and everyone simply by printing money....and ignoring the moral hazard.

Civilisation would break down within days, maybe hours, however.

wymondham

..... as long as the Govt refuses to let this pan out naturally, so could be quite a while....

HAMISH_MCTAVISH

Graham_Devon wrote: »

Well you could fix every single world issue with your theory Hamish. Wipe out poverty simply by printing money. Stop any potential financial issue ever happening by simply printing money. Give benefits to anyone and everyone simply by printing money....and ignoring the moral hazard.

Civilisation would break down within days, maybe hours, however.

Even by your standards, that post was just daft.

kabayiri

A Decade or so

Loughton_Monkey wrote: »

...
Other people, who are still of working age, will clearly see a different story. Particularly if they have had pay freezes, or, worse, lost their job. Those who rent rather than buy will also have a more depressing situation, since their housing costs diminish, rather than enhance, their net worth.

There is a good chance there will be more of these 'other' people than people like you going forward.

Somehow, some way, living standards will fall for many. If this process cycles round into deflating demand in the economy, then I consider that depressing ; if not technically a depression.

chewmylegoff

A Decade or so

Depression? These are the boom years for me.