Monday, June 29, 2009

Why the government can’t borrow

State 'may need to save more banks' warns OECD

Perhaps should be "Why the government can't borrow because it needs to later". The ongoing write-downs and losses, commercial property will probably ring a bell, will cause additional bank losses. As the state approaches their credit limit, the last credit card in town, they need to keep some back for emergencies. I have a comment on this.

Posted by stillthinking @ 10:12 PM (1815 views)
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2 thoughts on “Why the government can’t borrow

  • stillthinking says:

    It isn’t a new comment..
    The reason we are all in this world of pain, is because a large number of people have made huge losses speculating on property, and these losses continue to be hidden. The whole economy is being sacrificed for this purpose.
    The reason why banks are over-extended is because the winners in the property speculation game, are hoarding their profits and not putting them back into the market. The government cannot countenance repossession because it makes a family homeless, but not so in the UK, just a different family moves in.
    Should the winners be allowed to take their winnings (not such a strange idea), then the banks excessive credit expansion would naturally fall back as their bloated liabilites flow back into bankrupt mortgage accounts. Excess saved capital moves back into housing and clears existing mortgage debt. Through reduced liabilites and the bottom of the market the banks can begin credit creation once more.

    What New Labour don’t understand, and probably many over-leveraged mortgage holders refuse to even consider, is that there is no way out. Just a choice. Either you lose your home and are liable for the negative equity over the next twelve years, or , you lose your home -and your job- and are liable for the negative equity over the next twelve years.

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  • I think the government understand this very well. The borrowers don’t understand it and don’t want to think about it. Any government bringing it to their attention is signing its own death warrant. The incumbents might just maybe win again if they continue the smoke and mirrors, but not if they point out what greedy morons the general public actually are.

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