Bank rescues under scrutiny
Until this week many on the European continent thought they might just get a bit of spray on their faces from the financial tsunami that is sweeping through the UK and US economies.
Indeed there was a fair deal of sniffiness about the downside of "Anglo-Saxon" economics.
Although Chancellor Merkel and President Sarkozy might be a lot friendlier towards transatlantic capitalism than some previous French and German leaders, they are still extremely critical of unfettered capitalism.
Now banks in Ireland, Belgium and Germany are all in trouble and the governments concerned are all determined to step in.
The European Commission is looking at whether their rules against state aid are being broken by the hugely expensive Irish rescue plan, the shoring up of Fortis Bank by the governments of Luxembourg, Belgium and the Netherlands, a similar measure in Germany, as well as the British government's plan for Bradford and Bingley.
The commission is stressing that it is not about to suspend its rules and that they are "part of the solution, rather than part of the problem". The reasoning is that they help a quick bail-out and subsequent restructuring.
It would be interesting to know how the commission would rule on the proposed and rejected US measures - criticised by some Republicans as "socialism" - if it were a member country.
It is now clear that next month's summit of the EU prime ministers and presidents will be dominated by the crisis and there will be new, President Sarkozy-inspired plans on the table.
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What's missing is the reaction of the electorates in Europe and America to the banking crisis. Its obvious from the comments broadcast and printed and echoed by people in Congress in Washington that the general public are not happy to see rich bankers and their acolytes walik back to their rich lifestyles without any retribution.
It may be unfashionable but we need to see these people suffer.
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All bank bail outs should be banned. Economic colapse is needed in order to help all young people have a chance in life. Plunging house prices i welcomed that news with glee.
So what if ill advised and stupid people face loosing everything, thats the risk you take when you borrow more than you can afford.
Plus the Banker do need to be punished, 15 minutes of ecconomic anachy in the long run will ensure that in future we have better rules over lending.
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When the US President put forward Henry Paulson's Bail-out plan and described the altenative as being Amageddon for the country, the investors and the people, my first thought was that this was the only real Plan A with no Plan B being available.
Damned if the Bail-out was granted and doomed if the American's did nothing.
The fact is that the lending of money is easy when the price of houses is rising and wages and salaries are on the up with unemployment low and everyone bubbling with enthusiasm.
With lack of regulation and no controls the whizzkids have lent money to people who had no hope of meeting their obligations but who entered into loan agreements buying property worth 5 times their salaries and knowing full well that they could not meet their obligations if the economy were to falter and property prices drop. There was always going to be a day of reckoning and it duly arrived.
This lending and borrowing whilst the sun shone is not simply the fault of the Bankers. The Borrowers are as equal to blame - they entered into these credit deals with their eyes open but knowing they were taking a risk - they just simply hoped for the best and that is a sure way to trip over and fall down.
The Francophones may see this as a peculiar "Anglo-Saxon" phenomena but I await news of the first French or Italian Banks to start feeling the credit crunch - it will happen sooner rather than later.
But enough of the blame game. Blame is easy to cast but it provides no solutions.
The Bailout is Plan A and if passed will inject some liquidity into the US Banks (and some European Banks too) but the question is, "Is $700bn Bailout enough?" If it's not then that is going to require more and more printed currency being issued and this is just going to lead to inflation and the pain that that will bring. The US Banks could end up need $Trillions!
MarcusAureliusII, in his other persona of being a good guy and not having an axe to grind against Europeans, wrote a great comment at #3 on Robin Lustig's Blog under Bail them out or Let them sink?
I think it is well worth considering this as a potential Plan B. Any Plan B that gets the healthy and well-managed banks to survive and takes out the weak and badly managed banks such as Lehman Brothers is better for the tax-payer and is true liberal free market activity - the Bail-out is typically socialist and interventionist and requires tax-payers to fund it.
Sometimes it can be better to be cruel to be kind rather than simply roll over and let the taxpayer take it where the sun does not shine!
As to whether the EU approves to Plan A or any Plan B or not is, frankly, irrelevant as they are neither part of the problem nor, more importantly, are they part of the solution unless they are going to enter into supporting the cost of a European Plan A (Bail-out) or any Plan B that may arise.
Casting blame by the EU and the Francophones and Germanics is easy to do but does not provide solutions for individual people who are going to be the losers from this debacle; be it with higher interest rates, homes without real estate value and no jobs, no income and no quality of life in the very near future!
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This is an issue of peronal responsibility no body forced anyone to borrow beyond there means why should those who didn't bail them out?
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Menedemus @3,
Thanks for the referral to MarcusAureliusII's masterly series of comments.
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WhiteEnglishProud #4
Who is talking about bailing out borrowers? No one is considering doing this to the best of my knowledge. The whole talk is about bailing out the lenders.
As for bailing out the banks, well a part of me does want some banks to the wall to punish them for irresponsible practice. Sadly, the whole economy is built on banking and that affects us all. I favour a bail out, with much tighter regulation and supervision in future.
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By bailing out the banks you bail out the borrowers also otherwise Governments wouldn't be doing it.
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If banks fail their assets are liquidated meaning people who have over borrowed get there properties reposesed as they will be unable to find anyone who will offer them a morgate.
By bailing the banks out these people are being protected with our cash.
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Menedemus, do you think I"m Dr. Jeckyll and Mr. Hyde depending on whether or not you agree with my point of view?
The difference between the EU and US is that American citizens are blitzing their lawmakers with their opinions tellilng them how they want them to vote while the EU sticks to its arcane rules. If the US economy goes into a tailspin because the voters rejected the plans that were put up and the lawmakers weren't clever enough to come up with better ones, that's how democracy works for better or worse. In the EU, the decision will be made one way or the other by an elite acting as automotons independently of what their constituents want them to do.
Robin Lustig had the rare privilege (for a foreign journalist) of interviewing a Republican Congressman who voted against the bail out today but he was such an incomeptent interviewer that he kept interrupting him, challenging him, debating him so that it was all the Congressman could do to get his story across. BBC has become a truly awful journalist.
BTW, the Congressman told Lustig that the opinions of around 2000 e-mails to him from his constituents were running 99-1 demanding a no vote and after the vote and the market fall when the e-mail file server had to be shut down due to overload, the phone calls were running about 75-25 no for about 500 phone calls. How many e-mails and phone calls do you think the Eurocrats will consider when they make up their mind about bailing out banks? How many did they consider when Sarkozy wanted to cut taxes on gasoline a few months ago because it was killing France's economy?
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... the truth is the bailout WILL HAPPEN, and we will ALL pay for it. Europeans will pay for their own version of it, and similar things will happen elsewhere.
The people will support the bankers who will not be punished, and those who borrowed too much. House prices will stay too high for reality, AND we will pay extra for these mistakes through increased taxes, and reduced services and government spending.
The future generations will pay for the sins of the fathers through debt, pollution, and the environmental crisis. In the West an ever decreasing pool of working age people will support these mistakes, and the increasing pool of retired people... while democracy gives them an increasing say as a growing group. The need for higher birthrates will be countered by harder living with less money.
We are really living more and more by loaning from and shifting problems to the future.
It is bad to reward incompetence, as it invites more of it in the future, be it banking or bad government... but it seems to have become a rule in the Western society. I do not think we can fix anything.
Expect a BAILOUT v2 soon.
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We always pay for the mistakes of the previous Generation.
We are basically enslaving the future generations. Then we wonder why there is so much violence on the streets.
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Expect a lurch to the right and a return of extreme right wing groups across the world not just Austria
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Marcus,
Yes, to your first question! I happen to value your opinions whether I like them or not but I can also think you are two sides of the same coin and like the coin nevertheless. ;=)
I certainly agree that European Politicians can seem to be elitist BUT the ordinary citizens in the USA and in Europe may not really understand what is going on here and Politicians are elected to make decisions, for good or bad, on the day but not at the whim of the electorate.
Governing by Straw Polls is hardly a good way of managing $Trillion dollar Economies even if the politicians are as out of their depth as their electorates.
Sometimes Politicians have to make the decision for the good of all regardless of the people disliking the choice - simply because it is the right thing to do or may be the only thing to do.
The people may not like the choices but the Politicians are elected to be the choice-makers.
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WHAT IS CREDIT CRISIS?
FOR THOSE WHO WANT A 'STATUS QUO' OF THE CURRENT FINANCIAL WORLD ORDER, THIS IS A CRISIS.
BUT FOR THOSE WHO SEE IT AS A CHANCE TO CHANGE THEIR FINANCIAL STATUS IN THE WORLD, THIS IS A OPPORTUNITY.
By this simple logic we can understand that the EU financial elites want a status quo, that's why we have these bailouts.
The 'old generation' is dennying the opportunity to other 'young generations' to be on the sunny side of life.
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I was very entertained by the image of one US Congressman on BBC News TV who declared that the bail-out would put the US on the "slippery slope towards socialism." I think it really illustrates the core difference between the EU and the US.
As a happy citizen of the Benelux; I'm thrilled that our combined governments have saved Fortis by buying themselves in for 49% of the shares (falling short of full nationalization). Calm has returned to our financial sector, economic damage seems limited and Main Street (or, since this is Europe, should I say Market Square?) is out of danger.
Some of the comments here are by people who wonder what public opinion is like: I would like to point out that several opinion polls on websites of major Dutch newspapers indicate that some two-thirds of the Dutch population are in full support of government interference in this crisis.
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Question arises:
Should the 'middle' class which is becoming poorer everyday save this bunkrupt businesses?
Should the developing world, such as China, save the developed one such as EU?
Should the governments or EU lend money to banks which can borrow more than they can afford and will not payback same way as their customers?
Should the taxpayers give bunkrupt governments at their disposal more money to be used with such high risks, in plans which cannot payback, but ask for more?
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"The 'old generation' is dennying the opportunity to other 'young generations' to be on the sunny side of life."
I agree, but go futher the older generation are enslaving the younger generations by passing on their debt to them and still expecting them to pay for their retirement a luxury we will never have by the virtue of being worked to DEATH
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What should we do then?
Take back our freedoms.
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#3 - Menedemus
I share your enthusiasm for Marcus' Plan B and, in many ways, find it altogether better than Paulson's 'Black Hole'. However, what has become absolutely clear in the last 24 hours is that doing nothing is not an option. The near collapse of the Dow Jones following the failure of Congress to pass the Paulson, Bush, Bernake package is evidence of this.
In my mind this raises three questions:
A significant proportion of the equity holdings in the major stock exchanges are controlled by a relatively small group of fund managers for major institutional investors who are quite capable of manipulating the markets to send a political message. It is certainly more than possible that the big falls on Wall Street yesterday were engineered to send a clear message to Washington. That the President was again forced onto the offensive and that Wall St. opened up again indicates that the strategy may have worked. It has concentrated minds wonderfully but it raises the question of who is in control. Are the markets and government effectively equal and opposing forces? What happens if they fall into imbalance and the pendulum swings too far one way or the other? This is as important a question in Europe as in the States. Socialism is not the dirty word here that it seems to be in the States and there has generally been a far more interventionist tendency in Europe but the fundamental issue of the balance of power is still relevant.
Secondly, I notice the frequent use of the neutral word 'fund' in relation to the present situation. Nobody is talking about government intervention in failing institutions as 'investment' but equally no one is prepared to suggest that it is a necessary evil. This may seem pedantic but I think it is important to know whether failing institutions are being 'propped up' to avoid the wider social consequences or if governments see intervention as having long term investment value. Is this short term expediency or a long term investment strategy?
Thirdly, the question of European law. It seems to me that if national governments are having to intervene contrary to EU regulations to prop up financial institutions, the practice has now become widespread. The list of possible offenders currently includes the UK, Ireland, the Benelux countries, Denmark and possibly Germany. It seems today that a French investment bank may be on the verge of bail out and there are rumours of problems in Spain. Given the real possibility that, before this is over, most EU countries will probably have bent the rules if not actually broken them, one has to wonder whether they might be better to look at the law again instead of suspending it.
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In an ideal world yes but unfortunately the world is so sedated by TV, drug, Alcohol and Tabacco the energy of youth is taken away and we are walked all over.
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threnodio
Of course doing nothing is an option. Let the world ecconomy purge it bowls of the corruption that has be prevalent. We'll face the disaster that follows, then build a new better world afterward built on foundations of society and common sense.
better than passing the buck and saddling our children with the debt of others mistakes we've already ruined the planet for them not we are going to pass them a huge pile of debt to.
People need to face what they have done take responsiblitiy for it.
WE SHOULD NOT PASS THE PROBLEM ON TO OUR CHILDREN.
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#9 - MarcusAureliusII
You do have to admit that there is a common problem here. The Congressman is quite entitled to point to the contents of his mailbox as evidence that the package was not popular and deserved to be rejected. However, it is no more scientific than taking a straw poll of bloggers. For everyone who posts or bothers to email their congressmen, there are many thousands that do not.
In this respect the situations both sides of the pond are surprisingly similar. No one actually knows whether Sarkozy's fuel price cuts were popular because nobody asked the people. The same is true of the Paulson plan. Short of holding a referendum, you will never really know the answer.
Surely that is the whole point of the democratic process. You the people entrust governance to your elected representatives for a term of years. While you can lobby them and bring pressure to bear, you cannot actually force their hand any more than we can. The mechanics max vary but the principle is essentially the same.
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'Entrust governance to your elected representatives'
This is a facet of democracy i have always disliked. Especially in the UK Representative should be held to the manifesto pledges. There should also be a process to remove a representative mid term if enough of the electorate for that area no longer agree with there representatives actions.
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This comment was removed because the moderators found it broke the House Rules.
Well... conseuences if we do not bail out the banks... not sure if I even believe the arguments for it. Why should people NOT lose their savings if the made mistakes? I thought our society was about taking responsibility for one's actions... whatever.
MY QUESTION IS: what are the consequences of bailing the banks out?! Long term, are they bad or good?
I would have thought is any risk assessment BOTH scenarios should be compared!
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This comment has been referred to the moderators. Explain.
#24 - RCalvo
"Ensuring that money keeps flowing prevents a housing market glut, a credit crunch in which banks stop lending to each other (and, crucially, to other businesses), and bank runs which would leave anybody without savings or pension funds."
Very important point well made.
There is no shortage of money in the global economy. The problem is that it is becoming static. Money is, after all, just another commodity. It is intrinsically worthless. Only when it is put to work does it acquire a tangible value. It is no coincidence that the lexicon uses the word 'liquidity' to describe a healthy balance. Money, like water, has to move in order to work. If it sits there doing nothing, it simply stagnates. The trick is to get it moving again.
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Dear "WhiteEnglishProud":
I don't have any problem with you being proud of your pigmentation: everybody needs something to be proud of!
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#26 - WhiteEnglishProud
You have some valid points but get real.
37,500 invested at 7.5% would generate a bit over 2,812 a year. In the big scheme of things, 37 grand is loose change.
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Thernodio
"37,500 invested at 7.5% would generate a bit over 2,812 a year. In the big scheme of things, 37 grand is loose change"
Your right it is small change but there a at least 6 banks in the UK. I would find it hard to believe that you are sugesting that most people have savings of over 180,000.
And therefore the majority of people will not 'lose there shirt's'
Just people who are very rich, which is why these bail outs are happening. I would be intrested to know how much Bush and co stand to lose if they can't get this rushed though. It yet another example of the rich looking after themselve's at the expense of everyone else.
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I don't see a great contradiction between what governments are doing and the Commission's warning.
The Commission knows it doesn't have the legislative power to prevent governments from taking large shareholdings in Banks. What I see is that they are warning that this action should be a stop-gap, until that shareholding can be sold on to a private sector offer.
If the delay is reckoned to be too long, the Commission will act (EU rules require them to). But remember, Commission actions rulings even longer to work through into action than hospital waiting lists.
Also, taking such a large share stake in a bank (or any company) must surely give governments a large say over past and future management - and the payment of "parachutes" (golden or even slightly tarnished) to any execs who need to leave?
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The thing i am most proud of is the fact i am in a possition to argue my point, because i know that if the banks are left to collapse it will not affect me in the slightest.
I can only sumise that you have large savings, large debts or work for a bank.
At the moment i find all three situations distasteful
If you have large savings you are helping to keep the world ecconomy stagnant.
If you have large debts then you are foolish to have taken on debts you cannot afford.
And if you work for a bank then frankly i can't write what i would like too.
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... White, what I would like to do? Give the bank execs, and all involved in this mess, a lead parachute right over a deep oceanic trench.
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#32 - WhiteEnglishProud
". . . i know that if the banks are left to collapse it will not affect me . . ."
I'm alright Jack!
How very white, English, proud - and selfish.
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Ah, dear "WhiteEnglishProud",
I have a house that I've paid for by half by now, thus I have "large savings" (half the net worth of my house), "large debt" (the other half net worth of my house), and, in a way, I "work for a bank" (one third of my net income goes for mortgage payments).
I certainly would love to be able to spend my "large savings" in nice things. Unfortunately, I sort of need my house: Being married, I could hardly could go back to my parents'. And while my debt is large, I can afford the payments, and I prudently took a fixed-rate mortgage too.
I can't see what should be distasteful in all of that, anyway. Also, a lot of other people need "large savings" (read: a pension fund) in order to retire, or "large debt" in order to run a business and create jobs. Distasteful? I don't think so.
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Rob Hob
Not nearly pain ful enough for the devestation they have caused (i prefer EWP)
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* WEP
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threnodio
Basically yeah.
The Governments and banks around the world have been doing it for years. If i can gain from the uber rich losing their wealth then i'm content.
For once i'm in a situation where i can actually benift why shouldn't I?
It's just a user name thats provocative! I expected that in this PC country it would not be allowed!
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RCalvo
Then what's your problem
Your house has been over valued for years and so has your pension fund.
If you've paid half of it off you'll still have made a tidy profit.
The problem is you want it all. And you prepared to sell peoples futures to get it.
'THAT MAKES YOU A SLAVE MASTER' by definition
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@WhiteEnglishProud
"If you have large savings you are helping to keep the world ecconomy stagnant."
This one I DO object to. The "large savings" I have are currently sitting in a bank account whilst I try to find a new house.
They are also, in part, a provision for retirement. In fact a great many people who have money tied up the financial system have it in pension schemes of one kind or another.
Is everyone who saves against old age or sickness now "part of the problem"? Perhaps we should all spend the money on consumer goodies and holidays now - to keep the world economy afloat - and then demand benefit payments later when we need healthcare and help at home.
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#38 - WhiteEnglishProud
I don't think there is a lot of sympathy around for the 'uber-rich', as you put it. My point is that there are millions of people out there who have spent their lives doing an honest day's work for an honest day's pay. Some of them have reached the point where the have a bit left over to 'put aside for a rainy day' or save for their retirement. These are not super rich CEOs and money market dealers.
And where do they keep this money? Where their parents and grand parents kept theirs. Where it is safe and earns a bit of interest - the bank. What have they done to deserve your disdain?
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I suggest the old fashioned way of saving... buy gold, or land (after there is a proper price correction in housing)... distance oneself from paper wealth... bury the gold on the land. Invest in your own children's or grandchildren's future with the expectation they will support you (would fix West's population growth problems)... instead of stealing from them. This is just a few ideas.
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WhiteEnglishProud
"If you have large savings you are helping to keep the world ecconomy stagnant."
Of course you are not. That money is being used by fund managers for onward investment. It is constantly mobile. It is the lifeblood of the system.
What underpins it is the basic principle - we will invest your money wisely and you will get the benefits you have worked for. Then along come a bunch of clowns who break the contract by taking huge risks with your money.
Hold the clowns to account by all means but stop bashing the savers. They did nothing wrong.
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threnodio #22
On weekends, Senators and Representatives go back home to their constituents and have to face them to explain to them what they did and why they did it. Ultimately they face them periodically at the polls, every two years in the case of members of the House, every six for Senators. When do those in the EU who call the shota face their constituents and what jeopardy are they in if they don't satisfy them? If you want to know who the real culprits are who allowed the current situation in the US to emerge, fester, grow, and explode, look at those in Congress. In the EU look at entire populations who bought into a system that is completely invisible, unaccountable, and omnipotent. People get the government they deserve. Whatever happens in the US, we will have nobody but ourselves to blame. Who will Europeans blame for what happens to them? Guess who...President Bush because they will not face the truth about themselves.
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The savers trusted the clowns? Who is more foolish, the fool? Or those that follow him?
If you invested in risky or misinterpreted "securities", the responsibility for failure is still yours... just like any other business decision.
If you pick the wrong investment advice, make bad decisions, and lose your money... HOW IS IT NOT YOUR FAULT?
If you invest in things you do not understand, lose your money, why should the government bail you out?
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At the risk of being branded elitist and full of hubris, many of the comments on this blog underline the flaws of a democratic system of government. Simply put, many people eligible to vote are unqualified to do so. Look back into history those of you who promote the idea of allowing Wall Street to founder. If you know any, ask survivors of the Great Depression if they would like to relive those times. The financial ruin that Germany suffered through the reparations imposed by the allies after WWI was arguably a precursor to WWII. Loss of jobs, low levels of investment, increased poverty will be the results of doing nothing. The present financial crisis has been brought about by an administration that abdicated its responsibility to the American people. The finance community is the underpinning of the worlds' economies, it needs to be supported, and the oversight and regulation mismanaged by the Bush Administration reinstated. And it must be done NOW!
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i think this thing is going to end very badly
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#44 - MarcusAureliusII
In theory at least, the Commission ultimately answers to those who appoint it, namely the governments which appoint them. They in turn are supposed to be answerable to the electorate. So, in the same way as congressmen and women will get an ear-bashing if their voters don't like what they are doing so should members of parliament.
I think you may be talking about remoteness here. Because MPs are at least two steps removed from the EU commission, people for the most part simply do not see the point in complaining. There is also a tendency for MPs to shrug and tell people it's out of their hands. Actually this is not true but, by assuming it is, they play into the hands of the executive elite who think they are immune from public opinion.
This is why you see so many extreme shades of opinion regarding the EU. The eurosceptics will, of course, always believe that the remoteness is the whole problem and that we should all walk away. Others believe that the democratic deficit can be addressed by reform from within. This is why I personally favour a transfer of power from the nominated Council to the directly elected Parliament.
But you are right. There is a widespread perception that the Commission is authoritarian and undemocratic. Actually, it is not but, as you I am sure you will agree, a myth - once it takes hold - can quickly become a reality.
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threnodio #19 "what has become absolutely clear in the past 24 hrs is that doing nothing is not an option."
I think you are right. This phrase is an exact copy of answer of one int'l company director I interviewed in 2000. She (it was she) said, when in fin. crisis - do whatever - but don't sit still "evaluating changes in the market and drawing conclusions and preparing your plan". Make any step the hell! evaluate the result - make another step - adjust - get based on yourself. Because in the market turmoil no one will tell you what the new rules are, forget about environment and things.
In those yrs I was writing a dissertation on financial crisis management. 1st part was easy, I summarised all clever things advised by the books. 2nd part was also easy - I interviewd successful managers whose companies survived the fin crisis of 1998-2000 in Russia (it was not a Western thing, places, then Russia, never - "West") well, asked - what did you do, how did you manage to swirl out of it fine and well.
With the 3rd part of the dissertation I stuck for years. Because book/MBA advise and real survivors advise didn't agree the hell, and I had to employ Macciavellian techniques to make Part 1 and Part 2 meet.
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#45 - Rob_Hob
I think you are deliberately misinterpreting me. Of course I understand the small print - 'investments can go down as well as up'. What I am saying - as well you know - is that people can play the markets with unit linked stuff and they take the risk, but those who do not want to take the risk have always had a safe place to go - fixed interest accounts, savings and deposit accounts and the like. They chose the safe option and they should not now be exposed.
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newbriton @ #46
I will refrain from a response to your suggestion that many people eligible to vote are unqualified to do so.
However, you may be interested to know that some who promote the idea of allowing Wall Street to founder have been discussing the bail-out and its purposes for some time on the Blogs of Robert Peston and Robin Lustig.
Comments have moved from being pro-Plan A, being Paulson's Bail-out Proposal and the only option, to a point where considering the alternatives (if the US were unable to get political concensus for the Bail-out) becomes a possible Plan B. Just smugly accepting Pulson's Plan is an easy option but it does not mean that there will not be any pain attached to industry, the banks or, more importantly, the people.
As I mentioned at #3 above, my view is that we are damned to the US Government prints $700bn dollars if the Bail-out proceeds and paper money inflation will drive up Bank Base Rates mean the cost of borrowing will increase, firms will lay-off staff, unemployment will rise and mortgages will become harder to repay.
On the other hand we are doomed if we let the global banks with high level of toxic loans founder as this will likely lead to a stock market crash and deep recession at best or, at worst, a 2009 Great Depression with all that entails. The problem is that this recession and depresion is not an absolute certaintity as the Banks do have the cash to lend they simply do not trust one another any more.
However, the US Plan A (Paulson's Bail-out) is probably going to be adopted but it might not be the best solution as $700bn to purchase the toxic-loans maybe insufficient as no one person has the capability of assesing exactly how much value there is of toxic loan liabilities held by the US Banks (or other banks around the world who have bought these dubious assets) - no bank will admit to the value of the liabilities they hold and there is no way of finding out. It could require $Trillions to buy up all the toxic-loans and take them out of the equation.
I pointed to MarcusAureliusII's comment at #3 on Robin Lustig's Blog under "Bail them out, or let them sink?" as simply to pursue the Plan A proferred by George Bush at Paulson's prompt without a Plan B was foolhardy. At least, the option of letting some of the banks fail and not enter the territory of government intervention and socialist nationalisation of business and corporations should have been considered more openly.
Your comments regarding the Great Depression and the 1920s through to the World War II are included and covered in Marcus's comment #3 (and follow-ons).
Either way, whether Plan A (Bail-out) or any Plan B (Laissez-faire) is adopted, the world is going to have to face damnation or doom in the next few years with loss of asset values, recessionary pressures and high levels of unemployment the least of our problems.
People may be unqualified to cast their votes wisely but they are entitled to have a say about the world and how they feel about matters that will have a major impact upon the quality of their lives.
Those opinions are exactly what the Republican Representative are listening to and I'm not convinced they are wrong to oppose the Bail-out. But then that is only my opinion.
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#15, daquanqm,
I think the last thing that has happened is that the Benelux banks are in a state of calm, Fortis and Dexia have been bailed out but what about the rest of the Dutch banks, ABN is a disaster and I wait to see what those other great financiers in the Dutch part of Benelux have bequeathed to the rest of us next as the Dutch have long controlled many European banks.
To all the other posters, as for putting our savings, pension funds in safe areas why not just admit the truth, if we had been actually able to control our own destiny I personally would never have entrusted a bank and it's unintelligent expert fund managers with one penny of my pension fund, however governments insist that you put your money in one of it's agreed plans, firstly so they can control you and secondly because their mates in finance probably pay them backhanders. My advice to the young I know has been for many years don't take out pension or assurance policies, just save the money in long term savings accounts, and it's about time the tax benefits given to pension and assurance funds is also given to basic forms of saving, but than the politicians wouldn't like that.
Finally, I still can't understand why the various stock markets haven't simply been closed down for a month or so to ensure some calm returns to the market, Russia did it recently and I can't think of any reason why the EU could not, other than that the politicians are in the pay of the financiers who've created this crisis and who now want to try and make some money out of this disaster of their own making.
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Hi Buzet,
Slightly unnerved by your comments regarding ABN since it now belongs to Royal Bank of Scotland, Fortis (itself bailed out today) and Santander (currently Abbey and soon to be B and B). Are we talking cross border contagion here?
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What is happening now is just a mega-scale rerun of what happened in Finland in the early 1990s. The Finnish banks had been lending recklessly and ended up being rescued by the state. It might be a good idea to study the mistakes made in that bail-out operation: the government did not demand shares in return for the rescue package so when the shares recovered, the profits went elsewhere. Some 6-8 bn euros worth of the emergency funding (=taxpayers' money) was never recovered.
In the present crisis, the Belgian government for one has sensibly demanded a 49% share in Fortis in return for the rescue operation - so maybe the politicians have for once learned something!
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Whatever else happens, I do not want to be "represented" by Sarkozy or Solano or any French President or any Frenchman or any Spaniard that I know of.
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Nanotchka;
"threnodio #19 "what has become absolutely clear in the past 24 hrs is that doing nothing is not an option."
I think you are right. This phrase is an exact copy of answer of one int'l company director I interviewed in 2000. She (it was she) said, when in fin. crisis - do whatever - but don't sit still "evaluating changes in the market and drawing conclusions and preparing your plan""
Ever hear of the saying "out of the frying pan into the fire?" How about "look before you leap." Then how about "running around like a chicken with his head cut off?"
Acting rashly may be far worse than not acting at all. All it takes is one wrong step over the cliff and there is no going back.
"Make any step the hell! evaluate the result - make another step - adjust - get based on yourself. Because in the market turmoil no one will tell you what the new rules are, forget about environment and things. "
This is a prescription for suicide.
The first thing to do in a crisis is not to panic. The normal reaction to panic and act quickly out of irrational fear is almost certain to make things worse, usually a lot worse very fast. The first thing to do is understand what is happening and why. The next thing is to consider all viable options for different courses of acting and the likely consequence pro and con of each one. After that is done and you have had a chance to catch your breath....then you panic :-) Have you ever heard the expression, if you keep your head while all around you are losing theirs...you obviously don't know what the hell is going on? :-)
"In those yrs I was writing a dissertation on financial crisis management. 1st part was easy, I summarised all clever things advised by the books. 2nd part was also easy - I interviewd successful managers whose companies survived the fin crisis of 1998-2000 in Russia (it was not a Western thing, places, then Russia, never - "West") well, asked - what did you do, how did you manage to swirl out of it fine and well.
With the 3rd part of the dissertation I stuck for years. Because book/MBA advise and real survivors advise didn't agree the hell, and I had to employ Macciavellian techniques to make Part 1 and Part 2 meet. "
Here's something that might help you when you are in a similar position about writing an original dissetation.
http://www.youtube.com/watch?v=RNC-aj76zI4
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Buzet23, you have hit the nail on the head. In most of the Western world people are REQUIRED to pay into pension plans (under various names) for their entire working lives, there is no choice about it. Those savings made financial sense because of government incentives, and tax breaks.
Saving by yourself, in a bank account makes no sense... between your personal tax rate/ value loss through inflation/ risk cost, you will end up losing money.
This left wise investments.
The problem with the mountain of compulsary pension saving money is that it bread corruption and speculating of all sorts. The property bubble was part of it. In my part of the world a lot of pension funds had the option of a property investment split. Thus even in the case of pension accounts I DO NOT have full sympathy, people gained money as part of the system... now is the time to lose it.
Threnodio, I do not think your "safe" deposits are threatened. How exactly would the bail out help deposists? ... perhaps oly indirectly, and by itself is not necessary for them. The problem is with the various investments, and people NOT WILLING to accept the losses, while they were happy to benefit from profits.
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P.S. The blog needs a preview function for posts.
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I think it would be sad if we see a move now away from free market economics in any form. It has served the EU incredibly well until now.
I don't know why but for me, one of the most annoying aspects of the credit crunch has been that it gives people like socialists, or Sarkozy, ammunition to attack free market economics. Sarkozy really gives the impression to me that he's particularly smug over the fact that "he told us so".
As if there haven't been enough examples already to date that socialism is a one way ticket to failure as well.
Damnit let these banks go to the wall with only the very necessary protection and lets stick to our guns!
The freer the market, the freer the people!
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To #53, threnodio,
It is indeed ABN I was talking about as those three banks got sold a bummer by financiers obviously smarter than they, and I heard that at least one or more are now trying to get shot of ABN, certainly Fortis was last week. My guess is that the executives of ABN which used to be one of the biggie's simply took their money and ran before the s**t hit the fan.
To #57, Rob_Hob,
You're of course right that many private pension funds or life assurances gave you the right to choose one of three or four investment types, and I must say I chose the managed property funds which were less risky since I've never ever trusted the expertise of the financiers and traders. However with company pension funds the employee had no option and that's a real disaster for those obliged to pay into those funds. For all though, first came Gordon Brown who raided all those funds to pay for his dubious projects, and now comes the double whammy, the dubious investments of those who've told us for years how they were the experts i.e. the bankers.
I suspect that some big banks will start to de-centralise soon and/or become a lot smaller as nobody is going to trust a large global bank one bit. I look forward to the day when once more I can meet a bank manager who has the full power and responsibility to control his branch in every respect. At the moment they are pretty toothless as everything gets passed upwards to the experts and their committees, LOL.
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Buzet @ #52
threnodio @ #53
Your comments taken together worry me further.
HBOS own Bank of Scotland and if ABN is owned by Bank of Scotland AND toxic the Lloyds Shareholders are just about to buy a "pig in the poke".
It's not so much cross-border toxic contamination as viral infection that I am starting to become worried about.
As it stands with the share price of HBOS still falling one has to see the £12bn (pounds sterling)) Lloyds bid for HBOS as now being overpriced.
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What's the point of having a policy if you're not going to stick to it when the going gets tough? The only firm policy the EU appears to have is advancing its power and size (though to what end is unclear). Apart from that, nothing Europe says is solid. All things can and will be fudged at will.
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#61 - Menedemus
There is a bit of confusion here. ABN Amro is part owned by Royal Bank of Scotland which owns NatWest. This is a wholly different company from Bank of Scotland, which as you rightly say, is now HBOS and about to be Lloyds TSB.
Still GB is telling us today that the LTSB-HBOS deal is going ahead so if he says so . . . . um!
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Please excuse my bad english.
What I am wondering, is the following:
Imagine you are a millionair, and a US senator, or a billionair, and a US finance secretary, or a member of a big and wealthy oil clan, and an US president.
Would you invest 100% of your time to search the political solutions of the finance crisis, while the wealth of your family is in massive danger?
I bet, most of the time you don´t see Paulson, Bush and many other politicians of the world live on TV, they sit behind their desk, doing unnumbered phone calls, have meetings, speak to brokers and lawyers.
But I fear, they don`t care for us most of the time, but try to find a way to save their own skin.
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Another point:
If the accounts of 6 irish banks in Ireland are the only once with 100% warranty, what does this mean to all the other banks in Europe and the EU competition rules?
I mean, should'nt we all in Europe transfer our money to this irish banks immediately?
And what about the Maastricht rule, that allows only 60% state debt, while the irish governement gives warrantys 3 and a half time as high as their yearly GDP?
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#56 - MarcusAureliusII
Nobody said anything about panicking. Quite the contrary. It is the markets which are jittery and that is deepening the effect.
As I have said elsewhere, this is about perceptions. By appearing unable to agree, the administration and the legislature are not giving a lead. Meanwhile the financial world is running around like so many headless chickens. I am not promoting Plan A. I think in many ways yours is a whole lot better. What I am criticising is the inaction.
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#64 - starofthesouth
Not good enough! They are the elected representatives of the people. Many of them will be held to task next month - including the head honcho. If they value their political necks, they have to get on side - now.
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The reason that the german bank Hypo Real Estate brought in trouble, was as follows:
They bought a small irish investment bank, with only two things in mind: less taxes in ireland, less bank regulations.
Than this branch of the company made some terrible speculations.
Endproduct: german governement has to co-sign a tax and law refugee with about 35 bn Euros of taxpayers money.
If we are a common market and political union, if, in the case of Ireland an Germany, we even have the same currency, how can it be, that there is no harmonised tax system in narrow boundaries and an equal bank controlling?
I read today, that there are around 2500 international banks and investment companies located in Dublin, all searching for low taxes and lose regulation.
My intention is not to fight the irish, they only take advantage of bad EU laws.
But I want to ask the question to the british, wether there is an opinion change under the circumstances of crisis in your country now, that it would benefit the common market and all participants, if there would be more common regulation in it. And if in this situation it would benefit all of us, if we would all speak with one tongue and in a framework, that is equal in all EU countries?
Last week i found almost comical, that the day after the press statement about the bail out plan in Washington, I could read, that your PM plans to travel to the US, while our finance ministers announced a meeting with his french counterpart.
Shouldn't the european leaders not sit in an permanent assembly since several days and rule Europe together, instead of national solutions?
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To raman219 (54):
You are incorrect in few parts about Finnish bank crisis, mainly the crisis didn't cost to tax payers 6-8 billion euros that you claim.
When the crisis in the Finnish banking sector started, the Finnish government gave loans to banks that at the start were interest free but at time their interest rate would increase. All loans that were given to banks included a condition that if a bank in question couldn't pay the loan back, the loan could be converted to stocks. All banks that got loan did pay them back before the end of 90s.
The only bank that went bust in the crisis was SKOP. In the case of SKOP, government gave surviving banks a task to share the customers of SKOP between them and a possibility to buy assets that the SKOP had. All the assets that the other banks didn't want to buy where then transferred to two companies that the state had found to take care of the remaining assets: Arsenal got problematic credits and properties taken as collaterals; and Sponda got all real estates.
The end result of the operations of Finnish government was that in time all loaned monies where gotten back and when the Finnish economy started booming again, the property valuations of loans and real estates holden by both Arsenal and Sponda grew into a level where the Finnish government had gotten effectively its money back. Its a popular myth that tax payers money was wasted and never gotten back, but that is more or less untrue.
We should also remember that if the Finnish government a the time hadn't stepped in and helped to save the Finnish banking sector, the whole economy would have experienced even bigger collapse than it had. The cost of not doing anything is that the whole economy freezes and both healthy and fixable companies start to fall like domino's as they can't anymore find capital for continuing their operations and investments.
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#52 , Buzet23:
ABN is not a disaster. ABN got into trouble last year because their international sections were in debt (esp. the US part). The part of ABN owned by Fortis concerns only the Dutch branch of the former banking giant; which is quite stable and relatively safe. I therefore foresee no huge problems for ABN clients in the Netherlands.
RBS took over ABN's American parts, most notably the Chicago operations, which now appears to be a ticking time-bomb. That is, however, not Fortis' problem.
The only issue concerning Fortis' (Dutch) part of ABN at the moment is that everybody is too nervous to buy a bank in all the turmoil which means Fortis will be 'stuck' with ABN for a while longer. But, as I said, that doesn't have to be a problem. The media make it sound as if ABN is the root cause of Fortis' trouble when that is far from true.
As for other Dutch banks: ING, DSB and Rabobank are weathering the storm just fine and will manage, bar any extreme unforeseen circumstances.
There is also much tighter regulation in place in the Netherlands than there is in the US which means banks are less vulnerable here. You certainly can't hand out mortgages like candy on Halloween in Holland.
And let's look at the scale of the issue for the moment. The US government is debating a 700 billion dollar bail-out, which many analysts say would not even nearly be enough. The Benelux rescued its largest bank with just under 12 billion euros.
It's not even in the same league. It's barely even in the same game!
Regarding your comment: "I wait to see what those other great financiers in the Dutch part of Benelux have bequeathed to the rest of us" - do I detect some aversion there? I should like to point out Dexia has its roots in the French part of the Benelux and is, today, a Franco-Belgian corporation.
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#68 - starofthesouth
There are two reasons why your idea might be resisted in Britain.
Firstly public opinion. There is a widespread culture of euro scepticism in Britain and especially England. This, I think does not come from the British being anti-Europe but they are deeply suspicious of the sheer complexity of European law and view much of it as wasteful and unnecessary.
The other reason is that Britain is not in the euro zone. There is a reluctance to let go of the British pound, partly for sentimental reasons but also because it remains an important global reserve currency. Very reasonably, Britain is not going to continue with its own currency but allow the EU to have legal input into fiscal policy.
Above all, the British argue that the Common Agricultural Policy costs 47 billion euros (about 46% of the total budget) to promote policies which restrict global initiatives, unfairly reward inefficient farming, cost far too much money and is hopelessly outdated. Most European economists agree that this is the case and, until the beneficiary countries come to the table, the scepticism will be ongoing.
As to Irish liberalism in the banking sector, the guarantees on offer as I understand it are limited to private depositors and this only represents a small proportion of the total. We shall see what happens in the corporate sector in the coming weeks if Irish banks do come under pressure.
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threnodio and pvsutton
whilst i diod qualify large savings as in excess of 180,000 cash, i do withdraw the comment
I did in my mind anyway i did not include investment in property as a saving amount.
However i still believe we should not pass this debt on to our children so we can enjoy our life's more comfortably. Seeing as we are already considering moving away from free market ecconomics by the Governments around the world bailing out banks, maybe we should consider whether people with over 10,000,000 in personal wealth really need it?
Governments are proposing taking a slightly more socialist route with bail outs. I say why not take this opertunity to punish those who have made money through spreading this ecconomic woe.
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I think that this plan is wrong.
If Banks have been incopetent and bankers have been swiming in bonusees and milions in their wages,then let them fail.That is the price you pay in Capitalism.
If you not able to keep your bussines going thats the price you pay.That rule should apply to everyone.
I fail to understand this logic.
Why should the taxpayer pay a private sector out of trouble?
And when to stop doing it?
And whats to stop private sector of asking taxpayers money again and again?
This is Ridicolous.
Is against every principle of competition.And is against the very philosophy of Capitalism.
This is not a natural disaster.Governments are asking the taxpayer (in fact,they are not even asking the taxpayer) to pay for the troubles of the private sector,and what's worse for the most hated private sector of them all,the Banks.
What example is that to set?
What about competition?
What about Capitalism?
What about rewarding competence instead of incopetence?
The media has been making the case for the Government interference without ever giving equal consideration to the other side of the argument.It is as though its the duty of Government now to save the Banks with the money of the taxpayer,and as if the noble cause here is the fight to win the backing of the congress,when in fact many people,if not most people actually dont want Government to pay for the troubles of private sector.
Governments job is not to pay money to the private,but to make and enforce laws which make equal oportunities for everyone to sucseed,and in turn tax them for that.
I think that there can not be exceptions to the rule.
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Interesting news from Austria. As many will know the two far-right, anti-immigration parties did very well in the recent general election.
A study now shows that many non-Muslim immigrants voted for these two parties! They were attracted by the anti-Muslim, anti-"EU" and anti-USA rhetoric.
So "EU" lovers! Your "EU" has got immigrants so angry that they will actually vote for an anti-immigration party partly because it is anti-"EU"! Duh!
The "EU" is helping the far right, even if that is not its intention.
[Unsuitable/Broken URL removed by Moderator]
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#73 - Named-Erion
There seem to be a lot of people around with very short memories. Do you remember any western government lecturing the financial institutions about lending too much money to people who could not afford it? I do not think so. What I do remember is very large amounts of corporate money accruing to national treasuries as a result of taxing these ill gotten gains. National governments were gaining off the back of these profits and were complicit in their generation.
Do you recall governments pronouncing that short selling was dangerous and immoral? I doubt it. But you can bet that the 'get rich quick' merchants were paying some of the proceeds in tax. Unfortunately, these people with short memories included both members of governments and corporate financiers. They forgot that you cannot go on indefinitely pumping air into a bubble an not expect it to burst.
Their stupidity has come back to haunt them but this is not the time for recrimination. They have to sort it out, then they can repent at leisure.
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Buzet23 #60, I think the compulsory pension plan contributions are another example of government intervention that ends up distorting the functioning of free markets. The intentions were good, as alway, but the results not so much LOL Just like pure socialism.
The governments wanted to encourage savings so they do not have to look after people in retirement as much. This created piles of cash, which created speculating... and so on. Now we are in the end game of the process. The value or money created were imaginary paper/electronic numbers, that are now undergoing corrections with the resultant loss of value. I would be curious to find out how much pension fund savings contributed to the bubble creation... I do not know for sure.
If on the other hand people were told that when you retire, if you do not save up, or set your family up to provide for you, you will most likely starve and maybe die... peoples attitude to the future would be different... not expecting government pensions, which are another form of a personal bailout.
Instead of compulsion, governments should create rules and conditions that allow people to save up in their own way effectively. For example, instead of compulsory pension plans, count loss of saving value due to inflation against the tax payable on the profits, or only tax profits above inflation level.
Markets do need intelligent supervsion and regulation, SOMEBODY HAS TO SET THE RULES. Trouble is created though when governments, or regulators, go beyond setting the rules and enforcing them, or removing our choices and responsibilities. In the case of the pension plans removing our choices, while not providing effective alternatives.
I would ONLY support governement guarantees for compulsory pension savings... as this is the mess they created, and under my rules should take responsibility.
In the long run, the West has to introduce different rules, and remove these market distortions... or in the end we will end up repeating the same mess in a few decades.
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This comment was removed because the moderators found it broke the House Rules.
How about a £10,000,000 cap on capitalism with all personal wealth in excess of that taken to sort out this mess rather than everyone paying for it.
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To #70, daquanqm,
So you consider ABN to be it's former self when it was one of the main banks in the UK and one of the few at the top of Swift's international money transfer league table (some years back) and still stable and safe. But hang on if it was so reliable then why was it sold off, the Dutch have a reputation of being very astute businessmen, just like the Jews, so if they sold their bank then there was a very good reason and I don't think it was just the US offshoot being in difficulties.
However none of us are getting the truth, almost every bank you care to name, Dexia included, has been safe as houses until it has been exposed. Dexia as you say is part Belgium part French and was formerly owned by the Belgian communes until it was privatised not so many years back. It is clear that I was right to move my account from them some years back as I didn't like their approach even then.
One key aspect about this is that the larger a bank becomes the more it delves into risky undertakings, as there are too many 'large is beautiful' executives in Banking just as there are too many 'large is beautiful' politicians in the EU. The bigger the Company, Bank, Political Organisation the bigger the fall is being shown to be the truth and empire building has been a primary cause of this.
To #76 Rob_Hob,
You're right, the likes of Gorddie used the benefits of what's left of Capitalism after his Socialist regulations to fund his dubious priorities, and now he blows even more of the taxpayers money on the ruins he helped to create by his legislation. If the legislation had been restricted to 'honesty' and 'best practice', and if risky speculation like short selling, futures etc had been strictly controlled then a lot of this would have been avoided. One other thing that this problem has revealed is the effect of Globalisation, since in the past such overseas investment would have been much, much smaller. Now it's not just manufacturing and jobs that are exported but also the wealth, it's time to put a stop to all this and rewrite all the competition rule books that groups like the WTO use or to put it another way 'charity begins at home'.
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taxpower2006 @ #77
Your comment is very good example of twisting facts.
There is only one comment that even mentions Francophones or Germanics and I quote:
"The Francophones may see this as a peculiar "Anglo-Saxon" phenomena but I await news of the first French or Italian Banks to start feeling the credit crunch - it will happen sooner rather than later.
But enough of the blame game. Blame is easy to cast but it provides no solutions."
and,
"Casting blame by the EU and the Francophones and Germanics is easy to do but does not provide solutions for individual people who are going to be the losers from this debacle; be it with higher interest rates, homes without real estate value and no jobs, no income and no quality of life in the very near future!"
Your words are proof of the pudding that the EU, Francophones and Germanics are not only critical without offering solutions but that anti-semitism is still active in the mindset of some Europeans.
How sad it is that Europeans never learn the lessons from their own history!
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WhiteEnglishProud @72 wrote:
"... maybe we should consider whether people with over 10,000,000 in personal wealth really need it?"
Maybe we shouldn't.
On the other hand, maybeI should decide how much of your money you need?
Where shall I start? Do you really need two pairs of shoes whilst the poor in Africa go shoeless?
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taxpower2006 @77 wrote:
"I would say to our Americans commentators to look at themselves and in particular to the very rich and powerful Jewish banking community."
Yeah! Right! Why didn't I think of it? The global economic crisis is another one of these plots by Zionists and Jews to dominate the world!
Next: Let's blame the lizards!
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I make a slight typo in my first sentence when I said 'in the UK', I meant to say 'in Holland'.
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#78 - WhiteEnglishProud
Except that anyone with 10 million sloshing around is going to have it in the Cayman Island, Lichtenstein or in a biscuit box on the moon - in fact just about anywhere Mr. Darling can't get his hands on it.
Nice try though.
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#80 - Menedemus
#77 - taxpower2006
Gentlemen, this is getting way over the top. We have known for a long time that the idea that this was an anglo-saxon problem is a complete myth. You only have to see recall the machinations at Dresdener and the huge write downs reported by Deutschebank, UBS and Credit Suisse to realise that all the western banks had been unable to resist the sub-prime taster when it was offered. It was only a matter of time before French and Benelux banks were similarly exposed and the Irish have not rushed to underwrite deposits for fun.
I am quite interested to see how eastern European banks react in the coming weeks though. They were not as flush as western banks when the sub prime carrot came along and were not so tempted. I suspect that some of them are quite liquid. If there are some real bargains in the west in coming weeks, you may see some takeover activity coming from some unexpected sources.
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MaxSceptic
you can't have it both ways either you want everyone to be able to afford shoe's or you want a minority of super rich people which is it?
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threnodio.
Obviously it would need agreement across the world to work!
These are exceptional times, it needs more than just a bail out by the masses, those who have benefitted should be punished.
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The 'rescue' measures being discussed need to be properly focused and explained because the difference between saving some banks and saving the very structure that underpins our Western way of life is vast.
The latter is what we are being confronted with. Disaster, no matter the cause or who is guilty this time, remains disaster. Poverty, loss of a future, broken and homeless families are not 'left', 'right' or even 'Western'; they are tragedies.
Decision makers who delay or reject supporting the very economic structures that permit our way of life will be damned by history.
Punishments, blame, accusations and repayments can all come in due course but without timely and large scale intervention we are not even going to have the luxury of these indulgences.
It is also true that potentially suspicious across-the-board guarantees need to be examined and regularly reviewed by central bankers, but in these weeks give them the benefit of the doubt.
The USA for all its greatness and faults has really messed-up this time. Markets and political decisions need confidence in the players and above all the leadership. A more united Europe could finally assume some economic leadership but fragmented as we are, we leave the door open to Asian powers.
How ironic it would be if Asian 'copycat' economic models displaced the US and Europe as exemplars of market economies. The balance of world economic and political power has shown itself to be on an Eastern trajectory. The last thing we needed now was a total screw-up on Wall St. and in Washinton D.C. - all washed down with European fragmentation.
Maybe the brains in London are thinking of surprising the markets with an overnight 'show of unity initiative' to join the Euro Currency! In this climate anything is possible.
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It is not appropriate to compare the Commission's role with that of the US authorities. The US plan is one which, if adopted, would apply throughout the entire single market of the US. In Europe, each country is taking its own steps and it is the consequences of those individual country steps for the single market which the Commission has to assess. If there were a single European plan applied throughout the EU, the Commission would have nothing to say. It is precisely because each country insists on regulating "its" banks that Commission action is necessary to help ensure that damage to the single market is avoided - or at least limited to the extent possible - as a result of individual country interference in support of "its" banks.
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MarcAureliusII at #56 "Acting rashly may be far more dangerous than not acting at all. All it takes is one wrong step over the cliff."
In normal life yes. Crisis has own rules.
Nobody says close your eyes and jump from the 30th floor. But managers have to take decisions, even in crisis, and what I said (the advice of the survivor) is that getting external points for orientation will not work out in crisis, you have to use own steps and measure them, what results from your own action becomes your only benchmark in crisis.
So, yes, you have to take risks. Otherwise you'll float with the market, and end up where it ends.
For my dissert. I asked tops. I know who is who here. I didn't go to DHL, FedEx, Pepsico and Coke and the likes only. There were some idiots in big ones allright aplenty. I very much valued opinion of Westerners who'd come to Russia with nil, and exit 7 yrs later with selling their business at 2 to 10 mln dollars. Splitting the money between 2 or 3 friends. I trust these people. Their companies' survival in the Russ. fin. crisis is the best recommendation.
What it was you don't imagine. Customers unable to buy - anything - because state backed off on its obligations, and 90% banks backed off on their obligations as well. Savings accounts. Deposits. All gone. Nobody had a copeck left to buy any single service or commodity, unless that copeck was tucked under a matress in cash.
Company accounts in banks gone. Staff - to fire. Your suppliers - in the same shoes as you are. Rates re-written every day or every-hour, because rouble-dollar exchange rate changed 10-fold every hour. When 90% of companies did nil and stared, or - ran as headless chicken - some were able to get out of it. better than before. And these I've asked.
In fact I think I'd soon be able to sell their advice internationally...
You are not there yet, in such a crisis, and hopefully will not end up so.
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#86 WhiteEnglishProud,
I can't believe you actually think it can be one or the other, nothing is so black and white, and your first alternative of "everyone to be able to afford shoe's" is simply pure unadulterated communism, or as practised by our beloved Socialists, the redistribution of our money into the hands of anybody/anything they adopt as one of their lost causes.
One other side issue of this is that it's going to be years before the various governments and the EU have the funds to waste money once again. The money for these bail outs has come from public funds and there will now be a shortfall on all their spending plans, luxuries like overseas aid will need to be curtailed, so Africa, now is the time to stand on your own feet.
I am also a little concerned that the same type of people who have caused these problems in the banks are also in the central banks. They've all passed the same exams, received the same training and sit in places where the governments listen to their words. Don't panic, somebody said, I think it's too late for panic as the lunatics have been running the asylum for many years now.
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WhiteEnglishProud @86,
I was attempting to be ironic (something that the English are supposed to recognise).
I want secure and property rights.
Without property rights, all other rights are meaningless - hence the evil of communism.
It's a long philosophical discussion that I can't be bothered to go into right now. It boils down to whether you favour the individual over the collective, or believe that collective 'needs' and desires trump individual rights.
I stand for the individual.
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Nanotchka, did you like Lobachevsky?
Russia is like a banana republic only its banana is oil and gas. When the price is high, Russia is flying on its big ego but when the market collapses, it will be crawling around on its belly again. Anyone with brains knows when you are in this position, the best way to avoid the enormous swings in these cycles is to diversify. Even the Arabs are doing it. But Russia continues to waste its money on arms, play its byzantine intrigues with its military and spies, shun foreign investment by stealing its investments before it can realize profits from them, and is setting itself up for the next big bust. It's hard to see it coming when everything looks so bright but that's when you are set up for a big fall. Russia like the rest of Europe is far too arrogant to see it coming but rest assured, it will happen.
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On a more light note. Menedemus at #3 wrote "...MarcusAureliusII - in his other person of being a good guy and NOT having AN AXE to grind against Europeans..."
Reminds me of best Moscow police reports published by a newspaper here for fun and entertainment. Explanations written by muscovites grabbed by the police.
"It is lies what my neighbours say - I did not ran naked after my spouse with the axe in hands in the yard. I only wanted to catch her, kiss and embrace. And the axe I took to brush away moscitoes. And overall we have a happy and healthy family, not like that of my father - madman."
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People you stand for the individual has cause the break down in society which have cause most of these problems. People only care about themselves.
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Markushechka, what's banana skins to slip on - is your un-provided for dollars.
You have lived at the expence of the world, selling it paper, and getting real goods.
And whatever your next president will be - you'll continue bullying the world, because it's the only way to impose your dollars.
I am poor because you are rich. For my money Russian government bought your dollars, and stacked them away in the bag in high piles.
I have lighter conciosness than you are. If Russia collapses - it won't drag down with it the whole world. Our rouble is going down? Well, luckily nobody wanted it in the world anyway.
For the 2 investors whose money Kremlin grabbed (to a degree) there are thousands who didn't suffer. And you won't kick them out of here, somehow we are still an attractive market.
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Alice
Are Russians worried about what will happen when your stock market eventually reopen.
I fore see a huge fall coming for the Russian market.
Greedy investors will sell as soon as it re-opens
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95. At 4:02pm on 01 Oct 2008, WhiteEnglishProud,
If people truly took care of themselves first and foremost, and stopped uninvited interference and intrusion into other people's lives, the world would be a better place.
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Nanotchka, conscience? That's funny. Which country has a conscience? I think it was pretty clever of the US to borrow so much money and now all it has to do is turn on its printing presses to create more paper to pay it back with. Now you might say that the US will turn into Zimbabwe but when the US dollar goes down and the US economy tanks, the other currences will fall against it. It's a way to pay back expensive loans with cheap money. Ironically it's called inflation, that is deflating the value of the currency inflates prices. There are always winners and losers in inflationary times as well as deflationary times. If you are a borrower at a fixed rate of interest, inflation is your friend, if you are the lender, inflation is your enemy.
Will the next President continue bullying the world? Oh you give me such false hopes. What a pleasant fantasy.
Russia an attractive market? Not for investors. Stealing the assets of BP and Shell was a major strategic blunder IMO. The message is loud and clear, investors keep out of Russia, your property may be confiscated by the government there at any time for any reason or no reason at all except that they want it. It will be a decade, maybe an entire generation or more before foreign investment returns. Better hope the price of oil and gas stays high or Ivan will be looking for work again.
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Marcus Aurelius No 2 you have exceptional abilities to provoke people being silly. A compliment.
I am sorry for # 96.
Simply imagined how I, armed with hammer and sickle, run after you, with an axe in hands running after Menedemus...
WhiteEnglishProud # 97, No, Russians aren't worried. Even if all sell and run away when it re-opens. This is easily explained by it being exactly the stock market, something very artificial here and abstract, less than 1% of Russian population have bought shares or I don't know what, those papers of those Russian companies.
If I were to buy their shares I won't even know where to go to. I don't know one person in my address book who has shares in Russian companies. They were distributed internally between shareholders or I don't know who has them. Very rich people who buy them somewhere somehow. This shares-buying trend didn't affect Russian society yet at all, we are in the stone age in relation to it.
And it is a handful of companies anyway. 12? 14? who trade their shares in the stock-exchange. What do I care if a steel giant or an oil and gas giant another becomes poor. When they are rich it doesn't affect me either.
I'd care though if practical how to say, companies who assemble cars here or sell medications or branches if Western banks would run away, the Western bussinesses that do business here, sell me thir shoes and coats and foods and coffee, I mean Cadbury with chocolates and all normal businesses. These I care about that they stay. Not that abstract money market.
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In fact I thought in spite of turmoil most Rus. companies that are traded in the stock exchange are safe.
For the most part they are monopolists.
What can happen to the only electricity supplier in Russia? Whatever his shares trade, to fix things he'll just increase his monthly bill to my apartment. Can not go busted by definition.
Same with gas companies.
Same with telephone provider, because he is one, for the whole Russia. Will simply increase my telephone bill.
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The unelected and anti-democratic EU politburo (commission) has no business telling elected national governments and elected national parliaments what to do.
The crazy idea that elected politicians should have to answer for their decisions to unelected anti-democratic politburo kommissars is too ludicrous for words.
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@starofthesouth (68)
no, regulations shouldn't be the same everywhere, because that will kill enterprose and kill diversity. Competition is what generates wealth. State (or EU) imposed 'equal regulations' do not. See the Soviet Union for historical evidence of what happens when you start harmonizing laws all over the place and killing diversity.
The EU is killing diversity in Europe by forcing 'one size fits all' harmonization (gleichschaltung) regulations all over Europe. The EU has a 'one size fits all' solution to every problem. And therefore, the EU is the problem, not the solution. The EU is killing diversity.
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