When Us taxpayers are committing $6 trillion already already to banks and the mortgage sector, another $800 billion is almost petty cash. This crisis has changed attitudes towards sums of money and borrowing levels so fundamentally. Unfortunately, there does have to be a day of reckoning. Borrowing does have to be repaid and guarantees have to be met if things go wrong.
Let’s hope this time the US authorities have found the way to put this cash into the system so that it will stabilise the main banks and allow more normal commerce to resume. Even the mighty US has to be careful of just how much risk and borrowing it heaps on the broad shoulders of US taxpayers.
There is a certain irony on both sides of the Atlantic that governments and regulators who wanted to bring an end to easy credit are now resorting to the biggest government credit binge we have ever seen to try to put it right. I still find it difficult to grasp that a so called right wing Republican President should end up nationalising and buying stakes in so many banks. We call that socialism over here, and it has never worked in the past.
November 26, 2008
It's very instructive that Obama hasn't actually explained where this money will come from. He, like Brown, keeps promising significant tax cuts but if Obama actually delivers where Brown didn't, it's going to cost a small fortune.
I wonder if Obama will come under the same political pressure as Brown if he burys America under a generation's worth of debt.
http://www.lettersfromatory.com
November 26, 2008
I don't think it is fair to complain that Obama has failed to state where the money would come from. Neither did Bush and teh national debt has gone up from about $6tr to circa $11tr under Bush's period in office.
Anyway, look at the FED chairman if you want an answer as to the source of funding for this this fresh bailout. Bernanke has made it clear that the FED should be prepared to simply monetise any govt debt in order to get the economy moving. He fervently believes that America plunged in to the Great Depression because the then FED didn't expand the money suppplyh enough. Frankly its not true. The FED did expand the money supply. But the economy didn't pick up. Likewise Hoover did intervene in the economy. It still didn't pick up. Roosevelt continued these trends and went further, but essentially it was more of the same.
To my mind very soon America is going to see its currency collapse on world markets, followed by higher interest rates to try and offset this collapse. How soon the UK will follow is a moot point.
November 26, 2008
While I do not advocate the UK try to spend its way out of recession, the US is in a different position.
The Dollar is the reserve currency of the world, and far from collapsing, it has been strengthened by this crisis.
November 26, 2008
And it's un-American too!
Some of the Republican Congressmen during the debates were hilarious.
November 26, 2008
The point about an American Republican nationalising banks is well made.Gordon Brown is hardly of the extreme left either. We have had a revolution and nobody noticed it.The usual suspects were n't out fighting in the streets or making epic speeches in the Commons.No public drama not even any good songs.Strange.
November 26, 2008
A BBC Breaking News report says MFI has filed notice of intention to appoint administrators.
Icebergs come to mind.
November 26, 2008
I am not able to comment on USA because I know very little about it.
But did you see the Newsnight last evening when a banker (Abbey national), a Labour politician (that Scotch bloke whose name escapes me, but who seems to be in charge of some Committee), and a businessman were wondering why the Banks have ceased to lend money.
The poor banker tried, in banker's monotone, to explain. He failed completely to make his point: Basel and Libor were neither explained nor even mentioned clearly.
Jeremy Paxman pointed out that business people were "furious".
Then the politicians said that he was going to ask "Mr Mandelson and the Chancellor" (note the order) to call in the heads of all the banks and fix it so that they began lending again.
Erm…….
Well, he who pays the piper…….
November 27, 2008
Mike.
John Mcfall
Treasury select committee (something like that)
He seems to be acting as labour spokesman for the crisis.
November 27, 2008
The Banks are the real Govt, Westminster is a charade, we are simply being mugged.