700 billion bail out WILL WORK

utick

http://www.reuters.com/article/ousiv/idUSTRE48O9B920080925

'NEW YORK/LONDON (Reuters) - U.S. banks and money managers borrowed a record amount from the Federal Reserve in the latest week, nearly $188 billion a day on average, showing the central bank went to extremes to keep the banking system afloat amid the biggest financial crisis since the Great Depression'





If the us governments bailout of 700 billion goes ahead with the banks borrowing at a rate of 188 billion a day we should be good for about 4 days. time to celebrate, no more recession :cool:

Red Hand

I think it's funny how a few big cats have creamed off alot from poorer people and now want those poorer people to pay for the privelage of being screwed.

Overheal

Soc > Politics > US Elections 08

gixerfixer

If the bail out goes ahead capitalisim is dead as an ideal. It will also show the American people that they have a system of goverment that cares for the well off more than it cares for the working class.

Princess Consuela Bananahammock

gixerfixer wrote: »

If the bail out goes ahead capitalisim is dead as an ideal. It will also show the American people that they have a system of goverment that cares for the well off more than it cares for the working class.

I think that's a trend of democracy worldwide.

Darragh29

gixerfixer wrote: »

If the bail out goes ahead capitalisim is dead as an ideal. It will also show the American people that they have a system of goverment that cares for the well off more than it cares for the working class.

+1. This bail out shouldn't happen. At the end of the day, if it doesn't, we'll still have a roof over our heads and life will go on, just like it did the last time this happened. We badly need a special kind of a prison for people who bring us here...

Darragh29

Let's follow this to the conclusion...

Tomorrow morning we hear on the news that there is no possibility of a $700 Billion bailout, brace yourselves for what is coming.... What happens then???

Red Hand

Darragh29 wrote: »

Let's follow this to the conclusion...

Tomorrow morning we hear on the news that there is no possibility of a $700 Billion bailout, brace yourselves for what is coming.... What happens then???

We kill the Bourgoise and their rich overlords and install a Soviet People's Council in every hamlet, village, town and city in the land!

Workers of the world, Unite!

utick

Darragh29 wrote: »

Let's follow this to the conclusion...

Tomorrow morning we hear on the news that there is no possibility of a $700 Billion bailout, brace yourselves for what is coming.... What happens then???

the inevitable happens, a recession/depression, however if they keep adding trillions to the national debt the dollar will collapse, which will leave us in far worse shape

smithyadam

Darragh29 wrote: »

Let's follow this to the conclusion...

Tomorrow morning we hear on the news that there is no possibility of a $700 Billion bailout, brace yourselves for what is coming.... What happens then???

More big banks will continue going out of business, or being absorbed into bigger banks. People who work in those banks lose their jobs, lots of people lose lots of money.

The failing of those banks leads more people to be more skeptical about the strength of other banks. They take their business away from these other banks, who then start getting into trouble and fail/get absorbed by other banks. More people lose jobs, more money is lost.

After all these banks failing, people start getting more worried about other industries. People invest less, have less money to spend. Growth decreases, unemployment increases. Recession ensues, but since there's no investment on the horizon and markets are less liquid than ever before, there's that would suggest improvement anytime soon. Depression sets in. Inflation increases, growth decreases. Interest rates will skyrocket.

This carries on for a few years. And don't think that this will only harm people who work in finance. This is a global issue - that effects *everyone*.

smithyadam

utick wrote: »

the inevitable happens, a recession/depression, however if they keep adding trillions to the national debt the dollar will collapse, which will leave us in far worse shape

The Chinese wont let the dollar collapse for the foreseeable future.

Red Hand

utick wrote: »

the inevitable happens, a recession/depression, however if they keep adding trillions to the national debt the dollar will collapse, which will leave us in far worse shape

Will it though? The dollar has being declining for quite a while now, with some countries now trading oil through Euros.

gixerfixer

Is a depression possible in the next year or so? I will not pretend to know much about world financial matters but from what ive being hearing we are headed that way bail out or no bail out.

smithyadam

gixerfixer wrote: »

Is a depression possible in the next year or so? I will not pretend to know much about world financial matters but from what ive being hearing we are headed that way bail out or no bail out.

A depression involves restrictions in credit, reduced output and investment, either deflation or hyperinflation, widespread bankruptcies, reductions in output and currency devaluations.

A depression is a prolonged (and more extreme) recession.

If you asked someone in September 2007 whether it was possible for all of the big US investment banks to have disappeared by September 2008, for the US government to have taken control of some of the biggest corporations in the world, etc., etc. they would probably think you were crazy.

It's impossible to predict what will happen next week, let alone in a years time. Although it looks considerably less likely for the doomsday scenario with a $700 bn cash injection than without.

smithyadam

utick wrote: »

If the us governments bailout of 700 billion goes ahead with the banks borrowing at a rate of 188 billion a day we should be good for about 4 days. time to celebrate, no more recession :cool:

Do you know how much is usually borrowed by banks during "normal" times?

utick

smithyadam wrote: »

Do you know how much is usually borrowed by banks during "normal" times?

dont know what the figure is but im guessing its more than they can afford

smithyadam

utick wrote: »

dont know what the figure is but im guessing its more than they can afford

Where did you get your previous figure from then?

The bailout isn't anything to do with the overnight borrowing by banks. It's a completely separate issue - the overnight borrowing is a completely normal thing, which all banks engage in.

genericgoon

The problem is that many of these banks became too big to be allowed to fail. Which I'm pretty sure they realized and thus have been able to act with relative impunity, reassured that the Fed would bail them out. (Of course, Lehman Bros. collapse was a shock to the system, unfortunately, the AIG bailout immediately scrubbed out any line which may have been laid down post the Lehman collapse) Of course with JP Morgan and Bank of America seemingly gorging themselves on their faltering competitors, these banks are going to be so big they may as well have the same levels of protection as Mae and Mac had. Socialism for the rich and capitalism for the poor is basically how it works.

Darragh29

genericgoon wrote: »

The problem is that many of these banks became too big to be allowed to fail. Which I'm pretty sure they realized and thus have been able to act with relative impunity, reassured that the Fed would bail them out. (Of course, Lehman Bros. collapse was a shock to the system, unfortunately, the AIG bailout immediately scrubbed out any line which may have been laid down post the Lehman collapse) Of course with JP Morgan and Bank of America seemingly gorging themselves on their faltering competitors, these banks are going to be so big they may as well have the same levels of protection as Mae and Mac had. Socialism for the rich and capitalism for the poor is basically how it works.

This nonense that anyone is too big to fail makes me sick!!! Nobody is too big to fail! We're being drip fed this bu*lsh*t by an increaasingly desparate George W. Bush. It's like looking at a constipated old man on a toilet thinking that the more he holds it in, the less it will hurt!!! Let it go and then we'll sort the mess out, no matter how bad it might be! If you bust your ass open, we'll stitch it back together again for ya and in 2 months time, you'll be half back to normal, just get all that sh*t out and let us deal with the aftermath!

ninebeanrows

Jeremiah 16:1 wrote: »

I think it's funny how a few big cats have creamed off alot from poorer people and now want those poorer people to pay for the privelage of being screwed.

Go suck a lemon buddy,

Have you not participated in the Irish Economic Boom? Taken out a loan, bought a house, bought a car that back yonder you wouldnt of been able to afford.

Go stuff your good hearted soul into your bed if you honestly are taking this out on the so called " big cats"..

Its funny how the people who could not have had such oppurtunities if it werent for these people who took risks which like everything in life will always eventually fail, take it out on those who made such oppurtunity possible.

A fine hindsight:pac:

genericgoon

Darragh29 wrote: »

This nonense that anyone is too big to fail makes me sick!!! Nobody is too big to fail! We're being drip fed this bu*lsh*t by an increaasingly desparate George W. Bush. It's like looking at a constipated old man on a toilet thinking that the more he holds it in, the less it will hurt!!! Let it go and then we'll sort the mess out, no matter how bad it might be! If you bust your ass open, we'll stitch it back together again for ya and in 2 months time, you'll be half back to normal, just get all that sh*t out and let us deal with the aftermath!

Maybe I should be more specific. If one of these banks were allowed to fail it would almost inevitably have a devastating cascade effect on the entire financial system. Basically, everyone would pretty much run for cover and hope to wait it out. The global financial system would probably grind to a halt and that's when the crap will really hit the fan. This is why the neo-liberal model of deregulation is a bad idea as these things are too integral a part of the financial system to be allowed to just do what they like and end up screwing up everything. Of course, it is a global system and increased regulation may simply push these activities to other countries.

is_that_so

Darragh29 wrote: »

This nonense that anyone is too big to fail makes me sick!!! Nobody is too big to fail! We're being drip fed this bu*lsh*t by an increaasingly desparate George W. Bush. It's like looking at a constipated old man on a toilet thinking that the more he holds it in, the less it will hurt!!! Let it go and then we'll sort the mess out, no matter how bad it might be! If you bust your ass open, we'll stitch it back together again for ya and in 2 months time, you'll be half back to normal, just get all that sh*t out and let us deal with the aftermath!

Another factor is confidence in the system and in banks in particluar. Northern Rock is a very good example of what can go wrong. Rumours led to a bank run, followed by government inaction and they disappeared.

I'd agree with you on the perpetrators of the whole thing but inaction is a luxury that can be ill-afforded at this point. At this moment it appears to be the best plan available.

phantom_lord

ugh, economics discussion in ah.

ART6

Seems to me that once again we are all looking to the US to solve our problems caused by theirs and our own financial institution's and goverment's incompetence. If the US bail out is approved by Congress, then the US national debt will rise to many times their GNP, and it's already unhealthily large. That makes the Dollar a weak currency with an even more rapidly declining value, and since most commodities are traded in US Dollars, the world markets will continue to descend into chaos since no-one will know the value of anything any more. Meanwhile, Russia, with massive mineral, oil, and gas reserves will prosper, and the Ruble will gain strength. The Russian government has already staked it's plot in the world's market, and it can afford to sit and wait for the US to dig itself a deeper hole. Meanwhile, China and the far eastern countries are entering the global market and the Yuen is gaining by the day.

A few years ago, while doing business in Russia, I remarked to colleagues that we should look out for the Russians, because they could just pass the US as the global power if the Chinese don't get there first.

Peteee

ART6 wrote: »

If the US bail out is approved by Congress, then the US national debt will rise to many times their GNP, and it's already unhealthily large.

The US debt to GDP ratio is about 60% which puts it around france and germany levels, and far behind people like Italy and Japan (Which has a debt to GDP ratio of 200%)

Nevermind that for much of Bush presidency they have been running a massive surplus of many hundred billions a year.

Its about 10 trillion dollars at the minute... another 700 billion isn't going to break it, unless its the proverbial straw... which it may well be!

EamonnKeane

Ikky Poo2 wrote: »

I think that's a trend of democracy worldwide.

I think it's a trend of every society ever.

Cunny-Funt

ART6 wrote: »

That makes the Dollar a weak currency with an even more rapidly declining value, and since most commodities are traded in US Dollars, the world markets will continue to descend into chaos since no-one will know the value of anything any more.

So why don't we trade with the EURO instead? :eek:

A Dub in Glasgo

I think it is disgraceful that taxpayers have footed the bill for this folly rather than the many multi millionaires and bonus hungry sort that he finance world seems to attract.

This is quite an amazing state of affairs, I only hope they managed to get the taxpayers a good deal rather than the original 'if things go well - the Wall Street boys are rewarded, if things are not going well, the Wall Street boys are rewarded and the taxpayers pick up the tab'

A Dub in Glasgo

A Dub in Glasgo wrote: »

I think it is disgraceful that taxpayers have footed the bill for this folly rather than the many multi millionaires and bonus hungry sort that he finance world seems to attract.

This is quite an amazing state of affairs, I only hope they managed to get the taxpayers a good deal rather than the original 'if things go well - the Wall Street boys are rewarded, if things are not going well, the Wall Street boys are rewarded and the taxpayers pick up the tab'

its socialism for the rich and capitalism for the poor