UK nationalizes Royal bank of Scotland (and others)

[JP226]

http://business.timesonline.co.uk/to...cle4932250.ece

So the jist is that the Royal bank of scotland has been nationalized along witha few other key banks and now the brits are "insuring" interbank loans.

Where to start. How bout ya'll bring up some points as to whether this is a good or bad thing and I will react to them and offer my own analysis.

Atleast for an appetizer, i'll throw out no matter how much we "insure" or how much we "garantee" or how much we buy this crap up and pump money into the economy it does nothing. People, whther they are corporate entities or you, act according to their environments and the only thing a government can do is up an environment. I've been saying for the last few years we have a recession coming. It was obvious with all the cash the fed was pumping in and how high the dow was going. Sticky prices influenced people to over invest, simple as that. Unfortunately instead of the government helping to clear up the miscommunication problem, they are buying and insuring bad debt that will do what? It will keep the misinformation problem around a tad bit longer. Just like Roosevelt did back in the 30's, we're prolonging and extending recession and maybe we can begin chanting the d word. And it's funny to me because beyond the financial markets the economy is working and proving to be fairly robust. It goes up and down based on the unkown fluctuation in things like oil or corn or lumber or tech etc etc etc. Oh and not to forget, OR government involvement. These s like to keep you down. And what's worse, if they did nothing what would the average voter do? Complain.

[Kiljan Arslan]

prolonging LOL! I love how you claim to be an economist!

[Sphere]

Atleast for an appetizer, i'll throw out no matter how much we "insure" or how much we "garantee" or how much we buy this crap up and pump money into the economy it does nothing.

Its not about money, its about confidence. The credit market essentially doesn't exist anymore. So if you have 1$ of debt you are bankrupt. Governments are trying very hard to prevent another 1929. And IMHO without their help, we clearly would have already got there.

[Lord Consul]

Didn't know you had a Keynesian streak in you, JP. Over-investment = Recession is Keynesian thought in its purest form.

Its not about money, its about confidence. The credit market essentially doesn't exist anymore. So if you have 1$ of debt you are bankrupt. Governments are trying very hard to prevent another 1929. And IMHO without their help, we clearly would have already got there.

You won't restore confidence by throwing more money at the problem. It will only generate moral hazard.

[Kiljan Arslan]

yeah do nothing GREAT IDEA!

[Sphere]

You won't restore confidence by throwing more money at the problem. It will only generate moral hazard.

Without the Fed and the Treasury there would be zero investment banks left in the US today. Think about that, an entire multi-trillion dollar industry would have evaporated. That's not moral hazard, that's economic collapse.

And when the likes of GE and the State of California cannot get a loan...you have to put ideology aside.

[Lord Consul]

Actually, "do nothing" should be enthroned as the Golden Rule of economics.

[JP226]

Its not about money, its about confidence.

It is absolutely about money. Investments are based on the merit of the investment, not what the other guy is doing. And they have no choice but to be that way or they die.

Didn't know you had a Keynesian streak in you, JP. Over-investment = Recession is Keynesian thought in its purest form.

keyensian thought is built in optimism and pessimism of the market. What I said was based more along the lines of prescott that economies maintain an ultimate equilibrium over time and if you are below it you have a boom and above it you have a recession. And being below it or above it is based on shocks to the economic system, not the optimism or pessimism of investors.

Without the Fed and the Treasury there would be zero investment banks left in the US today.

If loans aren't given out, the people giving out the loans go outta business. The lenders face a negative return and society halts. It's not going to happen, with or without the fed.

I'm not an anti fed person either, I think they are a necessity from the problematic gold standard, but that doesn't make them immune to stupidity.

[Kiljan Arslan]

LOL! Yep do nothing and everything will be fine I think they tried that in the first five years of the great depression. YOu see the truth is that economics is not an exact science if it was you wouldn't have depressions, recessions and other but you do. Unfortunately ideologues would rather stay to their ideology then see that they may be wrong.

[Sphere]

It is absolutely about money. Investments are based on the merit of the investment, not what the other guy is doing.

When your investment is buying up dept from the other guy (aka the credit market.) it absolutely matters. The problem is that nobody knows who is going to fail next, so nobody is lending out their money. If government cannot stop the dominoes, that trust and confidence can't be restored.

[Lord Consul]

Much to the contrary, both depressions and recessions can be (and are) explained in a dozen of theoretical economic constructs, classical liberalism included.

[Kiljan Arslan]

Really completley? Can you explain how classical liberalism would have completley saved America like JP claims, and how FDR "prolonged" it?

[JP226]

The problem is that nobody knows who is going to fail next, so nobody is lending out their money.

heh, they may not know who is going to fail next, but they sure as hell can gather a probability of failures and give lout enough loans to offset that failure. This is how banks operate all the time, so what if the probability changes, the interest rate is a mechanism to bring things back into equilibrium. Only now the government is preventing that.

[Kiljan Arslan]

I love how its only the governments fault no one else's.

Sign of an Ideologue.

[Sphere]

heh, they may not know who is going to fail next, but they sure as hell can gather a probability of failures and give lout enough loans to offset that failure. This is how banks operate all the time, so what if the probability changes, the interest rate is a mechanism to bring things back into equilibrium. Only now the government is preventing that

I agree, this is how banks are supposed to work, but from every report I am hearing, the credit market is completely frozen. Not just slowing down or becoming more conservative, its frozen.

[Hunter Makoy]

the level of money flowing through the market absolutely has a big influence on the economy. its basically ECO 101. the more free money flowing out there the less value it has and so on and so forth.

we started out in a free market and we should still be in a free market. the more the government starts stepping in the less free it becomes, and problems actually become harder to correct. We let the government in in a big way after '29 because we felt the private sector has failed. now this has failed, but we want MORE government. eventually we are going to have to start dialing back or we're gonna end up like the USSR relying on another country to tell us wat things are worth. (the USSR was using the US for that purpose when they were around)

[JP226]

this is how banks are supposed to work, but from every report I am hearing, the credit market is completely frozen.

Alot of that is fabricated. Yes the markets are slowing but interbank loans are still happening. At a smaller rate but shouldn't that be obvious? Number one you have less banks needing the cash and number two less banks need the interbank loans because this waste, these loans that shouldn't have been given out, are foreclosing. Therefore banks have more cash on hand to cover their overnight and biweekly needs.

[Kiljan Arslan]

yes it's "fabricated" that must be why.

I believe the mongols must be making it up.

[MathiasOfAthens]

What started the european banking crisis?
________
WASHINGTON MEDICAL MARIJUANA

[Kiljan Arslan]

The government! its always its fault! Never anyone else's!