Why are we accepting this?

[1966_and_all_that]

firstly why did we need to shore up the banks?

Backstopping the financial system i'd agree with, but all that happens(ed) by bailing out the banks is that they will now operate in a worse manner knowing that the government through the taxpayer will be the means of protecting whatever activity they deem to undertake in pursuit of profit.

Also the banks should have been backstopped by the various financial regulatory systems in place and the central banks, but the regulatory processes were inadequate and the basic models of underwriting had been so massively distorted to be of no use whatsoever. The problem is they are still the same. The UK's top five banks have a asset footprint about 4 times the size of the UK economy. According to some economic research a drop of 3% in the markets would render the UK bamking system insolvent, it is quite possible that the UK banking system is already operating with an insolvent model. The euro zone is in an even worse state, the major banks of the euro zone have an asset footprint of about 14 times the German economy, and the euro still doesnt have a properly functioning central bank.

There were dozens of ways that the financial system could have been supported, shoring up the banks was probably the worst way to go about it.

I agree with your analysis of how the banks behaved post-crash. I also agree with your analysis of the inadequate regulatory processes leading up to the crash. However, in the instant of the crash the whole banking system could have gone down, including the retail sector. That is what drove Brown to recommend and then implement QE. It was about protecting the public. That is why it was the right thing to do at the time.

 

[Wizaard]

Why would an asylum seeker pay thousands of pounds to get in a boat risking their lives to leave a perfectly peaceful country. They are economic migrants. They post TikTok videos filmed on their latest I phones. They wear designer clothing and smoke proper cigarettes. Albania is not even at war and approximately 80% come from there. They control a lot of the drugs and prostitution which is a fact. I will never understand you looney lefties. Perhaps you could give a few a room in your house, and pocket money and 3 meals a day for free? Pay their dental bills, and drive them to a NHS overloaded doctor!

So many wrong statements there, it's not worth the effort and you'll stick with your bigoted prejudices anyway.

 

[Seasider1887]

So many wrong statements there, it's not worth the effort and you'll stick with your bigoted prejudices anyway.

There is no hope for you lot

 

[Costero Poderoso]

I agree with your analysis of how the banks behaved post-crash. I also agree with your analysis of the inadequate regulatory processes leading up to the crash. However, in the instant of the crash the whole banking system could have gone down, including the retail sector. That is what drove Brown to recommend and then implement QE. It was about protecting the public. That is why it was the right thing to do at the time.

Brown might have thought that it was about protecting the public, if he thought that he was truly deluded. Brown was advised that bailing out the banks was the wrong thing to do, based on the Japanese crisis in the early nineties, which recieved a huge amount of QE into the financial system to protect it which it still hasnt truly recovered from, if you look at it in standard economic modelling terms. I think the Blair brown administration was far too heavily influenced by the City, when you look at the various schemes of the era, PPP, off balance sheet accounting, etc etc. and huge numbers of consultants within the labour administration from the big banks and big accountancy firms, so its no surprise that when the financial system blew up the banks would be protected. There is some writing that points to advance agreements on the banking bail outs going back a year or two prior to the crash, that the banks knew there was a strong possibility of a crash, but im not convinced it rings entirely true.

People will have the opinion that it was the right thing to do, but ive seen enough to demonstrate that it was probably the worse thing that Brown could have done, because the banks havent changed their behaviour one iota. The banking system could have been supported, either through being taken over by the central bank or nationalised (might not be much difference there) or even ring fencing the day to day banking system from the "investment" banking side even if temporary or some other means Richard Werner had a bunch of methods, but to reward the banking institutions and the people that were running them was insane and I think the outcomes were predictable.

The banks are now incentivised to operate in that exact same manner; banks when they fail next time, and it is going to happen, will have to be bailed out, but the problem would potentially be so big that there is a doubt that the banks could actually be bailed out, (because of asset footprint being so much bigger than GDP) so some other mechanism would have to be employed to make them whole again. One point of view I've seen is to detach currency creation from sovereign ownership (which banks are already doing anyway - which was a contributor to the crisis), and allow banks to create their own currencies. Some of the big banks are actively pursuing their own versions of crypto.

 

[1966_and_all_that]

Brown might have thought that it was about protecting the public, if he thought that he was truly deluded. Brown was advised that bailing out the banks was the wrong thing to do, based on the Japanese crisis in the early nineties, which recieved a huge amount of QE into the financial system to protect it which it still hasnt truly recovered from, if you look at it in standard economic modelling terms. I think the Blair brown administration was far too heavily influenced by the City, when you look at the various schemes of the era, PPP, off balance sheet accounting, etc etc. and huge numbers of consultants within the labour administration from the big banks and big accountancy firms, so its no surprise that when the financial system blew up the banks would be protected. There is some writing that points to advance agreements on the banking bail outs going back a year or two prior to the crash, that the banks knew there was a strong possibility of a crash, but im not convinced it rings entirely true.

People will have the opinion that it was the right thing to do, but ive seen enough to demonstrate that it was probably the worse thing that Brown could have done, because the banks havent changed their behaviour one iota. The banking system could have been supported, either through being taken over by the central bank or nationalised (might not be much difference there) or even ring fencing the day to day banking system from the "investment" banking side even if temporary or some other means Richard Werner had a bunch of methods, but to reward the banking institutions and the people that were running them was insane and I think the outcomes were predictable.

The banks are now incentivised to operate in that exact same manner; banks when they fail next time, and it is going to happen, will have to be bailed out, but the problem would potentially be so big that there is a doubt that the banks could actually be bailed out, (because of asset footprint being so much bigger than GDP) so some other mechanism would have to be employed to make them whole again. One point of view I've seen is to detach currency creation from sovereign ownership (which banks are already doing anyway - which was a contributor to the crisis), and allow banks to create their own currencies. Some of the big banks are actively pursuing their own versions of crypto.

Are you saying that without QE the banks would not have folded? There was plenty of evidence that a run on the banks was about to happen. Many ordinary people with current and savings accounts would have been left destitute, not to mention the possibility of pension funds being emptied. I have no disagreement about your other analysis. There should have been a complete overhaul of the banking industry in the UK following the crash. RBS should have been put into special measures and the retail side split off from the investment side. It is a failing of the mainstream political parties that this did not happen.

 

[glasshalffull]

But France is a safe country. They are meant to remain in the first safe country. The NHS is already overloaded not to mention the housing shortages. We are full now! Of course it’s an attractive place to live but we can’t let anyone in.

Remainder of post removed.

And France takes in far more than we do.

 

[Costero Poderoso]

Are you saying that without QE the banks would not have folded? There was plenty of evidence that a run on the banks was about to happen. Many ordinary people with current and savings accounts would have been left destitute, not to mention the possibility of pension funds being emptied. I have no disagreement about your other analysis. There should have been a complete overhaul of the banking industry in the UK following the crash. RBS should have been put into special measures and the retail side split off from the investment side. It is a failing of the mainstream political parties that this did not happen.

The banks would have folded but there were other mechanisms as you say, support the day to day to day banking system, operational finance for business, secure savings and deposits, possibly even pump money into mortgage relief for the vulnerable, as you say split the day to day banking from the investment side as a matter of course. Keep the retail and day to day banking in special measures, and let the investment side of it fail, There would still have been a huge impact, pension funds etc, but where the impact was on people it could have been secured, and the bailout directed at people.

If the banking system at that level is as beneficial to society and the economy as is claimed (it isnt - my opinion is that it is a massive long term drain on the economy) it would soon have come back to a form of normality, but it would be a normality where the high risk investment banking would no longer be underpinned by the taxpayer.

The banking bailouts cost around 1.3 trillion pounds, from what ive read less than ten percent was used to underpin the banking system, the rest was used to underpin asset values, and directly bonus payments for senior bankers which just two after the crisis had already surpassed pre crisis levels.

It's easy for me 15 years later with hindsight to say this stuff, and i get that the bailout was supposed to be a short term fix to an emergency, but the financial collapse was predictable, and as you say a failure of the political parties to not fix the system 35 years ago, because it was apparent that the financial system was actually broken by the end of Thatchers term.

 

[td53]

i know you are probably being rhetorical when you say you want to know . . . . . . but here goes

If you privatise - within a short space of time becuase of market pressures there is the need to profitise, a 4 or 6% profit margin for a privatised utility is not enough to keep the share price up, and keeping the share price up is the all importatant quest to keep the investment institutions happy. So dividends and profits have to be higher, public utilities dont have that many ways to increase profit, and they are largely managed by self important morons, so cost cutting and reducing investment is that easiest way. off loading key infrastructure to release money for dividends is another factor.

fuck them cos they are ** us

Precisely. I don't know why this isn't obvious. Ok, perhaps the private sector had efficiency (perhaps) but those benefits are to be weighed by against the fact shareholders need their dividend so any cost savings to the user are set against the demand for profit.

Exactly this.
When I studied my Economics degree supply side economics (Reagan, Truss ) was already broken as a model.

We’ve just had 12 solid years of supply side stimulation via QE and at no stage in that 12 years could you say that the economy boomed and anyone but the super wealthy benefitted. Services collapsed and instead of Keynes style investment in infrastructure we gave the stimulus cash to the city to invest. The city made a fortune from it but little was invested in UK production or jobs.

Keynes economics is far from perfect but it still is the best model for getting out of poor cycles. US and Germany both went full Keynesian in the last decade. China has done that now for many.

This is the thing. We're following broken economic models based on nonsense. The whole austerity shite 'imagine a household budget' is utter crap. That's literally not how it works. A household doesn't have a bank. It can't use bonds to raise money to invest. A country is nothing like a household.

I know the point you make is slightly different but it's the same thing. Ideological rubbish dressed up as folksy common sense instead of actual thoughtful responses to the genuine issues that face actual real people. I.e. us.

 

[Costero Poderoso]

Precisely. I don't know why this isn't obvious. Ok, perhaps the private sector had efficiency (perhaps) but those benefits are to be weighed by against the fact shareholders need their dividend so any cost savings to the user are set against the demand for profit.



This is the thing. We're following broken economic models based on nonsense. The whole austerity shite 'imagine a household budget' is utter crap. That's literally not how it works. A household doesn't have a bank. It can't use bonds to raise money to invest. A country is nothing like a household.

I know the point you make is slightly different but it's the same thing. Ideological rubbish dressed up as folksy common sense instead of actual thoughtful responses to the genuine issues that face actual real people. I.e. us.

We're actually following absolute nonsense and creating broken economic models. The only ideology is to maintain and grow wealth in the hands of those who already have it. Mark Blyth had this interesting argument in Angrynomics in that most people now see themselves as a resource for the wealthy hence the anger and political populism. What Blythe I think fails to understand because he looks at it as an economic issue is that 95% of the population ARE a resource for the wealthy and always have been.