Thursday, Feb 26, 2009
Why the latest bank loan plan could do real damage
MoneyWeek: Why the latest bank loan plan could do real damage
The latest scheme to 'save' the economy could do more harm than good. Forget throwing money at banks to hand to naïve first-time buyers. David Stevenson suggests a better way to get much-needed finance to struggling businesses, and it doesn't involve subsidising broken banks...
Posted by damien @ 11:47 AM (398 views) Add Comment
1 Comment
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1. stillthinking said...
Probably because pension funds would lend money they actually have, whereas banks create the money they lend. So should we move into deflation as loans are repaid, then to reflate an additional source of credit money is required, which means either the same or new banks lending.
You could even argue that is why pension funds and banks have different names, to reflect the difference.
Ultimately this article ignores the very basic problem that lending at current rates is a loss maker, so while transferring those losses to the pension funds may alleviate pressures on government, doesn't sound like such a great winner for the funds themselves.
Further, they are legally obliged to hold gilts anyway. Ah, I see, the government buys back the gilts with printed funds...blah
No. Increase disposable income by cutting taxes and the public sector. The longer this inevitable action is delayed the longer we wait to recovery. New Labour have already pushed the recovery an additional year into the future...