Why is the answer to bankrupt banks always to pour millions more into them?
There is a risk in almost everything we do.
Walking, cycling, driving all have inherent risks. Take a job and you risk being made redundant or sacked at some point. The benefits outweigh the risks, but there are still risks.
Put your money in a bank, in stocks and shares or under the mattress and there is a risk your money may go down in value, or vanish altogether.
Putting it in a bank is actually less risky than anything else. Here in the UK, our banks have a guarantee scheme which promises to pay out up to £50,000 if the bank holding your money goes bust. Most of us don’t have £50,000 in our bank accounts, so the payout will be much less than £50,000 x number of customers.
Presumably an insurance company has sold each bank a policy which will pay out the customers’ money if a bank does go bust. This spreads the risk, which is something financial companies love to do. There is still a risk, but it is being managed by the banks and the insurance business.
So why does the Government have to step in and pour money it does not have into the bank to prevent it going bankrupt? Why don’t they let banks go bust so that other banks may see the writing on the wall and mend their risky ways?
Extending the argument, why do European countries have to stump up money they do not have to prevent Greece from defaulting?
A country which wants to join the European Union has to pass a financial test. If a country fiddles the figures to get in, or goes off the financial rails immediately after getting in, it runs the risk of being kicked out of the EU and told to find another currency and another sugar daddy.
Surely the hard-headed markets would think more of an EU which acted with this rigour then one which endlessly borrows or prints more and more money to keep a failing country and the investors who unwisely lent said failing country money from feeling the chill.
We are in the financial doldrums. Governments are cutting costs left, right and centre in an attempt to get their debts under control. But governments are still able to come up with zillions to guarantee that banks won’t go bust. It doesn’t make sense.
This is the nonsense which has sparked demonstrations by people from all walks of life who are simply fed up being told by politicians and bankers that it has to be done.
Politicians and bankers are insulated from the recession. The rest of us are not.
There is a risk in almost everything we do.
Walking, cycling, driving all have inherent risks. Take a job and you risk being made redundant or sacked at some point. The benefits outweigh the risks, but there are still risks.
Put your money in a bank, in stocks and shares or under the mattress and there is a risk your money may go down in value, or vanish altogether.
Putting it in a bank is actually less risky than anything else. Here in the UK, our banks have a guarantee scheme which promises to pay out up to £50,000 if the bank holding your money goes bust. Most of us don’t have £50,000 in our bank accounts, so the payout will be much less than £50,000 x number of customers.
Presumably an insurance company has sold each bank a policy which will pay out the customers’ money if a bank does go bust. This spreads the risk, which is something financial companies love to do. There is still a risk, but it is being managed by the banks and the insurance business.
So why does the Government have to step in and pour money it does not have into the bank to prevent it going bankrupt? Why don’t they let banks go bust so that other banks may see the writing on the wall and mend their risky ways?
Extending the argument, why do European countries have to stump up money they do not have to prevent Greece from defaulting?
A country which wants to join the European Union has to pass a financial test. If a country fiddles the figures to get in, or goes off the financial rails immediately after getting in, it runs the risk of being kicked out of the EU and told to find another currency and another sugar daddy.
Surely the hard-headed markets would think more of an EU which acted with this rigour then one which endlessly borrows or prints more and more money to keep a failing country and the investors who unwisely lent said failing country money from feeling the chill.
We are in the financial doldrums. Governments are cutting costs left, right and centre in an attempt to get their debts under control. But governments are still able to come up with zillions to guarantee that banks won’t go bust. It doesn’t make sense.
This is the nonsense which has sparked demonstrations by people from all walks of life who are simply fed up being told by politicians and bankers that it has to be done.
Politicians and bankers are insulated from the recession. The rest of us are not.
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