Why Can't Banks Fail?

[Pritt Stick]

Can growth really go on for ever? Is it a good thing anyway?

 

We live in a finite world, and more people are coming on line who quite rightly want a fair share of what it has to offer.

With more people to share it, that means we will all have to do with a bit less but we will all still have enough if it's done right, and the world will be a better place.

 

Dividing us up into 1% of super rich and 99% of seriously poor is not the right way to do it.

 

I think another definition of 'growth' might be 'use the earth's resources at a faster rate'. Worrying isn't it, as we live on a planet that is a closed ecosystem (for all intents and purposes) and resources are finite as you point out.

[tzijlstra]

Can growth really go on for ever? Is it a good thing anyway?

 

We live in a finite world, and more people are coming on line who quite rightly want a fair share of what it has to offer.

With more people to share it, that means we will all have to do with a bit less but we will all still have enough if it's done right, and the world will be a better place.

 

Dividing us up into 1% of super rich and 99% of seriously poor is not the right way to do it.

 

However admirable your point of view is (and it genuinely is) I don't think you'd give up 10 percent of your income to subsidise people that are worse off.

 

The simple fact is that as human beings we will always strive for more, better, newer. Behavioural economists prescribe this behaviour to an ever increasing desire to improve our own sense of safety, having a bigger cave to drag more berries, buffalos and goats into if you will.

 

A friend of mine decided to live life as a squatting anarchist at 17 because he saw this, occupying an old factory in Amsterdam with 20 other like minded people at the time. We all said he would grow out of it, but he still lives as a squatter, he denounced media in any shape or form, home-schools his son (with great difficulty) and lives of doing odd jobs for people that are sympathetic to his ideology.

 

However admirable that may be, I still want a hot shower when I come home, muckign about on the internet or slump in front of the telly. I still want to be able to fly to China to meet my friends there, or go on holiday to a nice cottage in Scotland. And he doesn't think less of me for wanting that, as he puts it: If we all lived like me the Netherlands should be renamed to Neverland.

[SpikeMac]

Fact is that if one big bank in the UK fails, more will fail. There won't be many to take over mortgages in a hurry, not only that, lots of people will try to panic sell their house, it will definitely impact on house prices negatively.

 

Not necessarily. If our government had bailed out the customers, rather than the institution, I think we'd have been in a much better position.

 

This approach would have given us two advantages; First of all, the casino high rollers in the banks would have been in genuine fear for their jobs. That would have moderated their behaviour.

 

Secondly, the important people would have been rescued without the additional costs of saving all of those who caused the problem in the first place.

 

Cheaper, punitive and a bit of behaviour management thrown in. What's not to like?

[tzijlstra]

Not necessarily. If our government had bailed out the customers, rather than the institution, I think we'd have been in a much better position.

 

This approach would have given us two advantages; First of all, the casino high rollers in the banks would have been in genuine fear for their jobs. That would have moderated their behaviour.

 

Secondly, the important people would have been rescued without the additional costs of saving all of those who caused the problem in the first place.

 

Cheaper, punitive and a bit of behaviour management thrown in. What's not to like?

 

I think that is oversimplifying the banking business a bit, although if the government had gone that way properly it would have got my support.

 

The issue with banks is that they do more than mortgages, so saving just the mortgages would still lead to a collapse of the stockmarket(s), a freezing of debt facilities for business and quite a lot of other things. If the government had had balls (not Ed) and foresight it would have nationalised the RBS group and Northern Rock outright and demanded mortgages and savings of personal banking customers from other banks it bailed out, reformed it all into a super bank in full national control and made the market honest that way.

 

But that didn't happen, basically because at that point it would have been the government going bankrupt had the banking crisis escalated even further.

 

PS: don't forget that RBS alone had 1,9 trillion in assets and 1,8 trillion in liabilities at the time of rescue. Even a write-off of 300 billion on that total asset-book would have been more than enough to bankrupt the UK instantly as it would never have managed to stump up that cash at an affordable rate.

[SpikeMac]

I think that is oversimplifying the banking business a bit, although if the government had gone that way properly it would have got my support.

 

The issue with banks is that they do more than mortgages, so saving just the mortgages would still lead to a collapse of the stockmarket(s), a freezing of debt facilities for business and quite a lot of other things. If the government had had balls (not Ed) and foresight it would have nationalised the RBS group and Northern Rock outright and demanded mortgages and savings of personal banking customers from other banks it bailed out, reformed it all into a super bank in full national control and made the market honest that way.

 

But that didn't happen, basically because at that point it would have been the government going bankrupt had the banking crisis escalated even further.

 

It is an over simplification, I agree. What we got was the worst of all worlds though.

 

We put in billions as taxpayers and simply underpinned failed executives and poor practices. The government should have demanded a much higher price for the bail outs. A price that would have made certain that this would never happen again.

 

I don't believe that they did that.

[tzijlstra]

It is an over simplification, I agree. What we got was the worst of all worlds though.

 

We put in billions as taxpayers and simply underpinned failed executives and poor practices. The government should have demanded a much higher price for the bail outs. A price that would have made certain that this would never happen again.

 

I don't believe that they did that.

 

True, I believe over time the government will have to clamp down on the power of banks properly, they were still screwing with the Libor rate whilst this storm had allegedly blown past.

 

Having said that, I thoroughly believe that in twenty years time we will only remember Gordon Brown as the man that prevented a total melt down, he acted when he had to AND more impressively, got other nations to tow his line. It is easy to dump on him, but he did all he could in a time of very deep crisis, a lot of people don't realise how close they came to losing their life savings and living in a country that would have resembled modern day Greece.

 

And I'm not a Labour man!

[Anna B]

However admirable your point of view is (and it genuinely is) I don't think you'd give up 10 percent of your income to subsidise people that are worse off.

The simple fact is that as human beings we will always strive for more, better, newer. Behavioural economists prescribe this behaviour to an ever increasing desire to improve our own sense of safety, having a bigger cave to drag more berries, buffalos and goats into if you will.

 

A friend of mine decided to live life as a squatting anarchist at 17 because he saw this, occupying an old factory in Amsterdam with 20 other like minded people at the time. We all said he would grow out of it, but he still lives as a squatter, he denounced media in any shape or form, home-schools his son (with great difficulty) and lives of doing odd jobs for people that are sympathetic to his ideology.

 

However admirable that may be, I still want a hot shower when I come home, muckign about on the internet or slump in front of the telly. I still want to be able to fly to China to meet my friends there, or go on holiday to a nice cottage in Scotland. And he doesn't think less of me for wanting that, as he puts it: If we all lived like me the Netherlands should be renamed to Neverland.

 

Actually, I think I would.

 

The older I get the more I realise that it's just 'stuff' and I have too much of it. To think that others have paid the price by not even have enough to eat makes me feel ashamed.

 

That said, and much as I admire your friend, I wouldn't be able to live like that, but I think there must be a happy medium that would suit everyone.

[Mecky]

Because people would starve, end of. It's the reason the gold was sold in 2008 and the reason why martial law was considered if people started to go hungry. Starvation is still a big threat to the UK and the reason why over 95% of lorries entering the UK are not checked at customs - the food would get up at ports and not get to the markets fast enough.

[jfish1936]

Well, there are real viable alternatives to the monitory system if people can manage to detach their life support money obsessions.

 

I like to think I know a little about life support.

First from diving back in my younger days. How relutant I was to part with those air tanks and regulator, how little faith that I could breathe 60 feet down without them!

Secpnd, from long years as an anaesthetist, how badly my patients would have donewithout their supporting machinery.

Dare I at 77 years cut free of my banking deriived pension. Maybe I'd find myself freer, or just dead!

[I1L2T3]

Banks theoretically can fail and should be allowed to. The process would rarely be a catastrophic overnight failure with customers scrambling to find alterntative banks quickly but would be an orderly resolution process managed by the Bank of England and Treasury working together. Initially that would involve providing props to support a bank to ensure it didn't crash - we've already seen that part of the process. This is underpinned by guarantees of customer deposits up to a certain level so customers are reassured. The next phases involve transferring toxic assets to new bad banks, splitting off other bits of the bank to create a number of smaller units capable of being sold off separately as entities in their own right.

 

It is happening right now, right in front of us. And has been for a few years. But the process isn't the catastrophic overnight collapse but managed to avoid destabilising the system.