Comments on: There’s another fine mess- Congress rejects the package

By: mikestallard

mikestallard — Wed, 01 Oct 2008 09:42:31 +0000

Isn't the root of this problem the fact that totally uncreditworthy people have been given huge loans? These loans have then been packaged together and sold on as "money" with the name of the (untrustworthy) bank printed firmly on the outside?
In which case, the ultimate answer isn't messing about with the current mess. It is, surely, to make sure that the people who the local banks deal with are trustworthy? Bring back Mr Mainwaring from Dad's Army!
Then, surely, there is the matter of the Banks themselves being trustworthy? Isn't part of the trouble here the Big Bang when totally unknown people with doubtful morals (Gordon Gheko) took over the banking and money system? It was not like this in the heady days of the British Empire when, as the Stock market's motto reminds us "My word is my Bond". Banking ought not to be just about making money: it is far too important (as we now see quite clearly) for that. Bankers (Mr Mainwaring again) ought to be people we slightly fear and respect because of their transparent honesty. At the moment, even the American voter has seen through them. If bankers were respected for their honesty, the American loan would have waltzed through Congress.
Soon, no doubt, the question will be whether the Chancellors/Governments themselves are trustworthy as the Treasuries run out of money. This can happen all too easily. It happened to us in 1945, it happened to Germany in the 1920s, it even happened, in Argentina quite recently. As I understand it, the 1970s weren't that much cop either.
For the scholarly blogger: it happened to Louis XIV and Felipe Dos of Armada fame too.
And the Roman Empire…..

By: Bazman

Bazman — Tue, 30 Sep 2008 17:12:50 +0000

Not quite everyone Frank. When I was skint a few years ago It was not all beans on toast and cheap lager, sometimes I had spaghetti hoops and cheap cider.
The American taxpayer has spoken and so should the British taxpayers.
Other unemployed people will eat and drink better for sure.

By: Neil Craig

Neil Craig — Tue, 30 Sep 2008 10:49:45 +0000

Many banks may want to raise capital. Equally there is no shortage of capital. The oil states & China have it lying around in billions. China is even willing to buy dollars with it. The shortage is in trust that money in western banks & other investments is safe. This is because we have hollowed out our actual productive capacity to create our much vaunted "post industrial economy".

The answer is to end the Luddite restrictions on any new technology & most of the old ones. However productive China is it cannot compete with us on high technology, yet. Plus we must cut the amount of the economy spent by government, probably see a drop in all western currencies & probably see some far eastern bahks increasing their presence here. Humanity has never had the capacity to produce wealth it has today but it doesn't come without doing it.

By: Andrew Forbes

Andrew Forbes — Tue, 30 Sep 2008 09:14:59 +0000

I don't begin to understand the intricacies of global finance, but quite agree that George W Bush's behaviour has been extraordinarily irresponsible and stupid. It reminded everyone very closely of the exact tactics he used to justify war in Iraq by telling everyone Saddam had huge stockpiles of WMD. But since people who know him say he isn't as stupid as he looks, he might have understood that if the banks were generally confident, they'd need no money, and the more he undermined that confidence, the more money would be needed.

When he was first elected, I worried, but thought we'd be fine provided nothing really happened in the world, as it hadn't for the previous 10 years. A year later we had 9/11, and now he's signed off by trashing the whole world's economy. If only my original fears had come true, that he'd be a totally ineffectual president.

By: APL

APL — Tue, 30 Sep 2008 08:23:51 +0000

JR: "What we need is an alternative strategy which restores confidence in deposits and normal financial transactions but give no cent of taxpayers dollars to once rich and powerful institutions and people."

The strategy ought to be to establish which financial institutions are insolvent, this is a situation where the daylight needs to be shone into the financial services industry. To restore trust between lenders and borrowers, we need to know if an institution is sound. Then deal with the CDS issue, putting all CDS transactions on a public exchange would be a good thing.

Finally, it cannot be said too often, the market was down not because of the failure of the US government plan, but because of the lack of short sellers in the market to arrest the decline.

The FSA, the chancellor and Gordon Brown, did the most stupid and dangerous thing but implementing the ban. Fools!

You really shouldn't allow children to play with big machines.

By: Manfarang

Manfarang — Tue, 30 Sep 2008 03:04:19 +0000

There is no quick fix.Central banks have already made a quarter of a trillion dollars available to banks.

By: Frank Davis

Frank Davis — Tue, 30 Sep 2008 02:14:40 +0000

So what happens next after the failure of the rescue package to be passed by Congress? Do all the banks go bust, the entire financial system grind to a halt, money get scarce, trade to seize up, and everyone have to eat stale bread and drink dirty water?

By: Peter Turner

Peter Turner — Mon, 29 Sep 2008 23:56:27 +0000

What are the chances that this global financial meltdown will have a destructive effect on the financial stability of the European Central Bank and the EU in general?

By: Mark Wadsworth

Mark Wadsworth — Mon, 29 Sep 2008 22:44:17 +0000

"Many banks worldwide need to raise new capital."

Agreed. But nobody's giving them any. Ergo, they should just swap debt for equity. Hey presto, banks recapitalised!

By: Kit

Kit — Mon, 29 Sep 2008 20:51:10 +0000

This is the Mises.org solution:

Austrian Bailout Package–Part A

1. Suspend Basil II regulations (to at least 4/2/09)
2. Cancel FDIC insurance on all demand deposits after 1/1/09.
3. Increase FDIC premiums on short term time deposits of less than one year.
4. Make interest earned (starting 1/1/09) on bank time deposits and non-governmental, non-agency, and non-authority bonds tax free (not demand deposits and MMMF).
5. Convert Fannie Mae and Freddie Mac's status from conservatorship into receivership.
6. Convert AIG's status from government owned to receivership.
7. Cancel the Primary Dealer Credit Facility (PDCF) and the Term Securities Lending Facility (TSLF) at the end of the announced program (January 30, 2009).
8. Announce that the Federal Funds rate will be allowed to "float" at market rates starting January 30, 2009.
9. Announce that the Federal budget will be prorated beginning with the fiscal year starting 10/1/08 including all defense spending and transfer payments.
10. Restore constitutional monetary status to gold and silver to act as an alternative medium of exchange (no capital gains taxes).
http://blog.mises.org/archives/008641.asp