Tuesday, Sep 30, 2008
FLASHBACK they will be back for more
newstatesman: Everything you want to know about the bank crisis
This is the worst financial crisis in 60 years, and it has shaken the banking system to its foundations. Even the Chancellor, Alistair Darling, has compared the crisis to the Great Depression and he is not given to overstatement. Banks are in the business of lending money they don't have - it is called "fractional reserve banking". But every so often the banks succumb to irrational exuberance, lend too much and find their reserves have been eaten up too fast, forcing them out of business.
This is what happened to Northern Rock, and is now happening to all the big banks.
That is why they had to be rescued to the tune of £50bn last month by the Bank of England - ie, us.
They will be back for more.
Posted by malct @ 08:31 PM (408 views) Add Comment
2 Comments
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1. planning4acrash said...
"Even the Chancellor, Alistair Darling" - Like, after destroying the rail system, that he's some kind of uber economics guru?!?!
2. jonb said...
I just have one problem with this article.
Just because the banks have failed to regulate themselves, and clearly they have; it doesn't automatically mean that the government would do a better job. They would invest in every politically correct vote winning scheme going, regardless of the commercial merits of it.