Financial Meltdown: What's the Solution?

[Gelsons Dad]

The solution which was missed was for the government to guarantee savings and buy up the pensions then let the banks that couldn't cope fail. That way peoples prudent savings were safe so the general population doesn't need to worry about loosing everything. The money gambled on investments was always at risk and in a true market it should be lost. Those with money or greed enough to invest in shares in an attempt to make more money knew the risks involved. This applies to the man on the street as well as the banks and investment brokers. There is a rule that the FTSE can only drop 10% before trading is stopped. This was brought in after the collapse in the 80's. It's a bad idea as it gives a false security to the stock market. It should be revoked. Banks should separate private banking from business and trading so the private capital isn't put at risk. The solution today is to provide the individual saver with security so they don't rush to withdraw their capital and let the rest fight it out. It's just a correction to the markets that was long overdue. So long that the cancerous bad debts were allowed to spread unchecked into all financial institutions. This should not be allowed to happen again. I don't like the current bailout idea as it is pure socialist doctrine and will have severe long term effects. Stalin would be proud. But 3 years from now when only the lowest paid can apply for loans from the state owned banks the people who drive the economy, industrialist, capitalists, entrepreneurs will all be operating in countries with free markets and the UK will stagnate as it did in the 70's.

 

[Danish Blue]

for once the danes have got it right

they didnt piss about they were decisive and clever. Rather than chuck taxpayers money at it the got the banks to set up a fund to support themselves. The banks have all contributed to a fund of 35 billion kroner which any financial instituttion can draw on at penalty rates, any failures will be absorbed into the banking system through the fund. In effect the biggest bank here has 35 percent of the fund thus gets 35 per cent of the failed bank.

 

[Bigga]

The solution which was missed was for the government to guarantee savings and buy up the pensions then let the banks that couldn't cope fail. That way peoples prudent savings were safe so the general population doesn't need to worry about loosing everything. The money gambled on investments was always at risk and in a true market it should be lost. Those with money or greed enough to invest in shares in an attempt to make more money knew the risks involved. This applies to the man on the street as well as the banks and investment brokers. There is a rule that the FTSE can only drop 10% before trading is stopped. This was brought in after the collapse in the 80's. It's a bad idea as it gives a false security to the stock market. It should be revoked. Banks should separate private banking from business and trading so the private capital isn't put at risk. The solution today is to provide the individual saver with security so they don't rush to withdraw their capital and let the rest fight it out. It's just a correction to the markets that was long overdue. So long that the cancerous bad debts were allowed to spread unchecked into all financial institutions. This should not be allowed to happen again. I don't like the current bailout idea as it is pure socialist doctrine and will have severe long term effects. Stalin would be proud. But 3 years from now when only the lowest paid can apply for loans from the state owned banks the people who drive the economy, industrialist, capitalists, entrepreneurs will all be operating in countries with free markets and the UK will stagnate as it did in the 70's.

Interesting post, GD.

Couple of questions. Are you suggesting that the 'free market' is really a free market, at all? And secondly, why a bailout in this country at all, then and why would the U.S. gov do so to the tune of $700bn and not, say, $3000bn?

Trying to work out why the relatively small amout injected as it will just get swallowed up, like it didn't happen!

 

[Danish Blue]

under the danish system as well no bank may pay a dividend for 2 years, no bank may pay a director a bonus for two years, no bank may buy back its own shares and no bank can offer stock options, they will be forced in effect to rebuild their balance sheets.

not sure GD how effective stopping the limit down rule would be, as we have seen recently in places like indonesia and russia, the rules have gone out the window, they just close the exchange when they like.

 

[Balti]

How is it nobody knows how to reverse the disaster??! Will simply stopping the 'spectulative market' and the 'loss' earners bring about trust again?

And besides the two I've mentioned, who or what industry stands to benefit from the global crisis...?

The rich will benefit. The economy needs to be shrunk so that the rich can make money all through the growth cycle all over again. Big companies will benefit as they buy up struggling small competitors on the cheap. Businesses will benefit as they have an excuse to cut costs by laying off employees.

One thing is for sure. It won't be us average Joes that benefit. We're the ones being asked to bend over to receive another shafting.

These things are cyclical and I have no doubt that once the shakeout is complete we will see another period of 'unprecedented growth', 'the end of boom and bust' etc etc while the fat cats line their pockets all over again.