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tomandlu

What Was The Direct Cost Of The Crunch

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Hi,

I was trying to see if I could find out what the financial crisis cost directly - i.e. how much more did the UK government borrow specifically to deal with the crisis. This would basically be a total of:

  • Lost tax revenues (since these would then have to be borrowed just to stay at the same place)
  • Any directly accountable money given to banks due to the effects of the crisis
  • Any other unambiguous money spent to counter direct effects of the crisis

I'm not really interested in whether the money was spent wisely or not - just trying to get a feel for what the total was. I'm slightly stymied because when I look at graphs this, it would appear that nothing really changed - the government just kept up its usual practice of borrowing more than last year...

As far as I can tell, lost tax revenues account for about 20 billion, and direct payments to financial institutions appears to be about 1500 billion. Is this correct? Does anyone know what the total value of ordinary deposits is/was in the UK? Would I be right in thinking that about a third of our current debt is directly attributable to payment to financial organisations?

Does anyone have any idea what the current state of finances* would be if the government had directly merely guaranteed any ordinary deposits and let any too-big-to-fail bank go down in flames?

* without getting to what-if about it - I realise that the implications would have been huge, but I'm just trying to get a basic idea of the balance sheet...

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Hi,

I was trying to see if I could find out what the financial crisis cost directly - i.e. how much more did the UK government borrow specifically to deal with the crisis. This would basically be a total of:

  • Lost tax revenues (since these would then have to be borrowed just to stay at the same place)

  • Any directly accountable money given to banks due to the effects of the crisis

  • Any other unambiguous money spent to counter direct effects of the crisis

I'm not really interested in whether the money was spent wisely or not - just trying to get a feel for what the total was. I'm slightly stymied because when I look at graphs this, it would appear that nothing really changed - the government just kept up its usual practice of borrowing more than last year...

As far as I can tell, lost tax revenues account for about 20 billion, and direct payments to financial institutions appears to be about 1500 billion. Is this correct? Does anyone know what the total value of ordinary deposits is/was in the UK? Would I be right in thinking that about a third of our current debt is directly attributable to payment to financial organisations?

Does anyone have any idea what the current state of finances* would be if the government had directly merely guaranteed any ordinary deposits and let any too-big-to-fail bank go down in flames?

* without getting to what-if about it - I realise that the implications would have been huge, but I'm just trying to get a basic idea of the balance sheet...

did i miss something? is it all over now then?

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did i miss something? is it all over now then?

Well, I'd like to think that governments are now bored giving money away they don't have to people who screwed up.

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Well, I'd like to think that governments are now bored giving money away they don't have to people who screwed up.

lol, yeah, we'd all like to think that but unfortunately it isn't how things work.

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The problem is no one actually knows at this stage. The UK government guaranteed some debt but as yet that guarantee has not been called upon. Much of the right wing media have exaggerated the cost to make Brown look bad (a job he was doing OK without their help TBH). The core of the problem is the potential losses from the CDOs and RMBS instruments that have been traded across the globe. These instruments are worth something but its difficult to see what.

Furthermore if you want to be fair you need really to look at the pre-crunch cost inasmuch as that Brown overspent because he believed the absurd hyperbole of the banks about the long term security of the bubble. Had he have been more sceptical its quite possible that government spending would have been lower and as such the deficit lower.

The chart in the Guardian which has been posted up on this forum a number of times suggests that about 60Bn has been "given" to the banks. Your figure of 20Bn lost tax sounds right, but is that a "cost"? Certainly if you add these together its a good half or more or the 156Bn needed to get to what one might call "prudent" spending :)

The crash is not over and there will be many more costs to come. Putting people out of work and paying them dole will have a cost I'm sure...

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  • 146 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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