Sunday, Aug 02, 2009
Could this have been said at the Mansion House?
Geocities: The Depression Papers of Herbert Hoover
"While the crash only took place six months ago, I am convinced that we have now passed the worst and with continuity of effort we
shall rapidly recover." And other such gems... 1st May 1930... erm what happened next????
Posted by techieman @ 08:36 PM (937 views) Add Comment
19 Comments
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1. techieman said...
my only comment is : http://www.youtube.com/watch?v=bE_1tCasi_Q
2. devo said...
Ah, techieman, forgive my terrier-like tendencies, but will YOU attempt to answer the question, 'Why didn't the government let the banks fail'?
3. novice pete said...
Indeed.
4. techieman said...
Fear of Contagion. ...or if you like a conspiracy.... or because they wanted to maintain the old school network.... or the masonic network. take your pick.
Is the question why didn't they or shouldn't they have? Personally i think they did right not to... or to put it another way if they had of they could not have administered the insolvencies (not enough folks to do that) and there would have been an economic meltdown. However that's just my view - i am willing to concede the counter arguments. It depends what type of bank though and the associated counterparty risk.
What would they have done if they had put HBOS into administration for example? I am no insolvency expert, but my understanding is that the company would have to be wound up by maximising assets (i.e. calling in loans) so that the creditors (i.e. the government / tax payer - because the FCSC would not have been able to cope - and the government would have had to fund the shortfall) would get maximum dividend.
Can you imagine them calling in all the loans / mortgages etc?? What would have happened then? Massive asset liquidation, and then we really would have fallen off a cliff. They had made a precedent anyway with NR.
5. techieman said...
Or i suppose they could have sold on the loan book - but who would have wanted that? And how much would they have paid for it?
As im in an entertaining mood this might assist you....
http://www.youtube.com/watch?v=5ZinKzTJ5vw
6. techieman said...
Devo any chance you..... http://www.youtube.com/watch?v=EPuYfFw-9Oo
If you can then please enlighten me! :-).
7. devo said...
Cheers techie; not the 'soundbite' answer I had hoped for, but thanks all the same.
8. techieman said...
Actually its the wrong question - the question should be how did we let them get to the stage where they would be able to fail, without a run etc. 2 arguments here - either not enough regulation or too much.
Eh? Ok well lets start with too much regulation. If you "insure" deposits then that means that people have no incentive to choose less risky deposit takers, so you end up chosing the one that pays the best % IR. [Don't get me started on the people that invested in Iceland.
If however you accept that deposits are insured then you have to make sure you dont de-regulate them so much that they basically can throw the dice and keep the winnings on a good throw .... and still get to keep the money if there is a 7 out line away pay the donts.
If that last bit made no sense then see http://www.online-casino-tips.com/craps-do-donot.html.
9. techieman said...
Devo it may not be the right answer either - i am no expert in this field - its just what i think. I would be happy to hear a sensible argument that shoots me down in flames.
I dont subscribe to banks = bad therefore let them fail. If one bank = bad fair enough, but if all the banks then there must be something wrong with the system. I am afraid thats the difference between banks and say manufacturers. As much as it may disgust people, you can let a manufacturer fail but ... as things stand ... and IMO .... not a (retail) bank.
I've just ordered Fools Gold by Gillian Tete. When ive finished with that i might change my mind!
What soundbite were you after? And whats your view?
10. techieman said...
... and yes - i just read the "darling" blog so i think you should ask Flash for his views. He wasnt around when this came up before with NR, BB etc. He will probably be much more relevant on that one than yours truly.
11. devo said...
8. techieman said... Actually its the wrong question...
It isn't the wrong question, techie. The general public will eventually want to know of the government:
'What are you doing/have you done to fix this?' NOT 'How did we get here?'
12. devo said...
10. techieman said... whats your view?
Like you, I think the system is at fault, but I think it will be forced to change more than you can possibly imagine.
13. techieman said...
devo we will just have to disagree. The fix should have been made BEFORE it got to where it got because it only got to where it got BECAUSE of it wasnt addressed by government before.
There is still event risk and that's what may happen later - incidentially that's the whole point of my posting. GB for example thinks he has "saved the [world] banks"... it might only be a stay of execution. If you read what Hoover said the parallels are uncanny. Not only that but Hoover refers to previous similar credit boom busts in his speech. This aint a new phenomenon but its not a very common one.
And it not being very common is why people think its all over and we will go back to normal. Take a looks at the renegade economist site and see what Fred says in the latest video about Ireland.
14. techieman said...
12 & 13 crossed. I can assure you i have quite a vivid imagination - i normally keep it to myself though because i dont really want to shove bad news down peoples throat. You tend not to get invited out when you do that. Better to nod your head and move the subject onto the beautiful game... in my experience.
15. devo said...
14. techieman said... 'i dont really want to shove bad news down peoples throat.You tend not to get invited out when you do that.'
This isn't a dinner party though, is it?
If people like yourself started to speak from the heart on HPC, we might start to move on from naughty EAs, BTLs etc.
16. devo said...
Great 'Hoover' post by the way.
17. techieman said...
devo - its a fair point, but i think i have been quite vociferous on here about most stuff. Whether right or wrong i often express my opinion (perhaps too opinionated!), whether or not it agrees with anyone else.
Now you could say all this will bring about the end of civilation as we know it, that is a financial meltdown coupled with peak oil and global warming etc etc. That we should all go out and get guns etc.
Personally i dont go that far. (indentially i have a friend who does go that far - and hes a bit of a climatologist type) Yes there will be more crime - as there is in all recessions. Could we have massive civil unrest? Well if a major bank did fail AND the government said sorry but we cant afford the FCSC so all the savings and pensions you have all worked for....tough.
THEN i could see some real issues. Will that happen? In my view no. If it was to when would it happen? A few years yet. If it dont happen and we have a depression will there be a war to get us out of it? Possibly - although how can that work when we could all just nuke each other. When will that happen? Again in a few years. Do i believe in an aluminati or similar? Not really but i have no real clue if such would exist.
Thats all a bit conspiraloon for me Devo. But we shall have to wait and see how dire things get in the next downleg (yes i think there will be one and no i dont know how that will manifest). On here i hope thats wrong and we just see another 25%+ fall in HPs, and then everything is hunky dory.
I am interested also in the hyperinflation possibility but to me thats all it is at the moment - the government would have to do a ton more stuff to get there. Will they - again an imponderable at the moment, and if they do create that environment it wont start for a few years IMO.
Right am going to hit the sack now - have a good one and i look forward to reading your views in the morning.!!
18. devo said...
Right am going to hit the sack now...
Lightweight!
19. devo said...
Japanese Uncle predicts house price falls of up to 90% but, unless I'm mistaken, fails to comment on the social unrest that would inevitably follow.
Do you stand by this prediction, japanese uncle?