Should we have let the banks fail?

[muhammad_isa]

New loans should be harder to get than they are.
Prices would fall, but to levels which reflect the market for housing needs, rather than speculative value.

I agree .. but if large corporate banks are allowed to operate a business that is based on interest payments, why should people not apply for their loans? If they go bust and aren't bailed out, that means big trouble for the currency. Basically, the system continues on a global scale, and the gap in wealth between the haves and have-nots continues to grow..

 

[Revoltingest]

I agree .. but if large corporate banks are allowed to operate a business that is based on interest payments, why should people not apply for their loans?

As a frequent borrower, I can answer that.....because we need the money.
Requiring a lower LTV (loan to value ratio) would greatly decrease the likelihood of anyone defaulting.
Interest payments are necessary to induce anyone to lend.
Without earning interest, there'd be no reason to lend it, ie, return would be negative.
Might as well spend it on booze, loose women, & fast cars.

If they go bust and aren't bailed out, that means big trouble for the currency.

Bank failures wouldn't affect currency values....except perhaps to make cash dearer.

Basically, the system continues on a global scale, and the gap in wealth between the haves and have-nots continues to grow..

That's a different issue from what we're discussing at the moment.
But under my tax schedule, the poor would fare much better.

 

[muhammad_isa]

Interest payments are necessary to induce anyone to lend.
Without earning interest, there'd be no reason to lend it, ie, return would be negative.
Might as well spend it on booze, loose women, & fast cars.

That's not quite true .. a person could invest their money in a business (stocks & shares) or give to charities of their choice. That's the whole point of capitalism, making money due to the fact that you have a significant quantity. It's not the same as a person who works hard all their life, and manages to save some for their retirement .. they can't afford for banks to collapse .. they can lose their life savings .. either governments need to back them, or they should provide a means whereby pensions might be goverment controlled and not put at risk by people doing business with money (as a commodity)!

 

[Revoltingest]

That's not quite true .. a person could invest their money in a business (stocks & shares) or give to charities of their choice.

It's quite true, ie, that if I want to borrow or lend money, someone will expect to pay/be paid for the following....
- Administrative costs
- Risk
- Opportunity costs
- Profit

That's the whole point of capitalism, making money due to the fact that you have a significant quantity.

No, capitalism is far broader than that.

It's not the same as a person who works hard all their life, and manages to save some for their retirement .

They are included in capitalism.

. they can't afford for banks to collapse .. they can lose their life savings .. either governments need to back them, or they should provide a means whereby pensions might be goverment controlled and not put at risk by people doing business with money (as a commodity)!

The government (FDIC)does guarantee deposits to some extent.
It's important to diversify one's investments.
Bank & lender failures just aren't that important compared to industrial company failures.

 

[Shadow Wolf]

either governments need to back them

Might be different in the UK, but here in America we have the FDIC, which insures up the $250,000 per depositor per bank.

 

[muhammad_isa]

Might be different in the UK, but here in America we have the FDIC, which insures up the $250,000 per depositor per bank.

I didn't know that, but something similar operates in the UK .. the idea is to stabilise and protect the usurios financial system
Nevertheless, who are the losers when the banks get bailed out by goverment in this way .. everybody, but particularly the poor. Who are the winners? Much like lotteries, the people who run these institutions