A Country Decided Not To Bail Out Its Banks, And This Is What Happened

  • metta

    Posts: 39108

    Mar 07, 2013 12:41 AM GMT
    A Country Decided Not To Bail Out Its Banks, And This Is What Happened

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    Mar 07, 2013 1:03 AM GMT
    Interesting...I always thought the economy would recover faster if the banks were allowed to fail like any other entity. Instead, we now have a "bandaid" on the economy; and that wound will probably continue to fester until the banks stop getting bailed out and finally fail.
  • Lincsbear

    Posts: 2605

    Mar 07, 2013 1:21 AM GMT
    If private companies like banks aren`t allowed to fail, then where`s their incentive to get things right in the future?

    I think the timid politicians have created what`s known as a 'moral hazard'.
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    Mar 07, 2013 4:14 AM GMT
    In the us, Western Europe the political and financial rely on the quid pro quo of campaign funds/legal financial protection, and we end up paying for it (this goes for both sides of the aisle). Tis is also what happens to the unions and the democrat party in the US. we, the middle class end up paying so the politicians can stay in office and get rich.
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    Mar 07, 2013 4:39 AM GMT
    I'm not sure how I feel about the bank bailout, even now several years later. It feels ethically wrong, but I don't have the knowledge to determine whether or not it kept the recession from worsening.

    Could the fact that Iceland skipped austerity measures (which are the worst thing you could possibly do in a recession) actually be the reason for its success?

    And a band-aid isn't necessarily a bad thing. It often prevents infection. icon_wink.gif I'm suspicious of any sort of folk reasoning when it comes to something as complex as a national economy, because it's so easy to go astray.

    It's an interesting point about smart people innovating in the financial sector rather than in technology. That is undoubtedly a bad thing. I wonder if it actually has an appreciable effect on the pace of innovation. Unfortunately, now it seems like many of our best and brightest spend their workdays trying to find new ways to get people to click on ads.
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    Mar 07, 2013 4:47 AM GMT
    Lincsbear saidIf private companies like banks aren`t allowed to fail, then where`s their incentive to get things right in the future?

    I think the timid politicians have created what`s known as a 'moral hazard'.


    Perhaps said banks need to be a lot more regulated etc, and I would expect them to acquiesce gallantly in consideration of the enormous amounts of money and charity they have been shown.

    OK that was a little dry; likely they'll have to be dragged kicking and screaming into behaviours that reduce risks to their clients.
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    Mar 07, 2013 1:19 PM GMT
    meninlove said
    Lincsbear saidIf private companies like banks aren`t allowed to fail, then where`s their incentive to get things right in the future?

    I think the timid politicians have created what`s known as a 'moral hazard'.


    Perhaps said banks need to be a lot more regulated etc, and I would expect them to acquiesce gallantly in consideration of the enormous amounts of money and charity they have been shown.

    OK that was a little dry; likely they'll have to be dragged kicking and screaming into behaviours that reduce risks to their clients.


    It wasn't ever charity that they were shown. Money given to them and lent was out of greed and fear - it's statements like these that make me wonder how they ever let you near a bank. The bailouts should have never happened.
  • fiction

    Posts: 3

    Mar 07, 2013 1:52 PM GMT
    Its funny the ratio of the economy the banks grew in comparison to other parts of the economy.. mostly through imaginary value created by the invention of financial products that were a cause of the collapse. The toxic assets on the books have never removed from the banks that were created by these very products.. yes.. lets give them money at basically 0% at the discount window.. that they turn into debt for ordinary people.. the insurance companies secure the debt so even if the loan isnt paid.. they get a return(hence why AIG failed) funny how a house costing 100k turns into 300k.. it makes no sense.. Luckily we knew better