THE UK bailout vs the US bailout

[TStag]

Just seen that Paulson is expecting more US financial institutions to fail despite the bailout and thought it worth expalining what's going on in the UK.

 

As I understand it the Bank of England will offer to buy upto 50 billion dollars worth of preference shares in UK banks (the entire UK banks, excluding HSBC are only worth about 120-140 billion dollars). The all the big banks are also expected to take on loans from the Bank of England totaling another 50 billion dollars. Effectively they are all being recapitalised (by much, much more than they need). The Bank of England will also guarantee a further 800 billion dollars of inter bank loans. So effective banks will be able to insure loans to other banks in the UK. The overall aim is therefore to encourage banks to loan to one another on the basis that the bank of England is acting as guarantor for up to about 800 billion dollars. In all the total package is worth about 1 trillion dollars.

 

The UK is a small country compared to the USA and is arguably in a less bad position. Despite this some economists are expecting unemployment to rise by 500,000 to 2 million although must think that this is a very clever bailout and will soften the landing for the UK economy. The UK taxpayer is heavily footing the bill and the stock exchange is even nervous that the UK government could default on the debt.

 

The question I now have, is this. If this bailout is deemed to be very clever by leading economists and the "best plan so far". Is the US plan far too little, too late, are the other European counteries doing enough. And if not are we all doomed anyway?

[AlRozzi]

The question I now have, is this. If this bailout is deemed to be very clever by leading economists and the "best plan so far". Is the US plan far too little, too late, are the other European counteries doing enough. And if not are we all doomed anyway?

 

I don't think it looks good at all. I feel the US government is going to default on its debt at some point within a couple years. Consider that nothing has value except for whatever somebody is willing to pay for it. So while housing values are falling, stock market values are fallling, so too can US treasury securities if people feel they can't collect on them. Taxes will need to be raised substantially to pay for all this, and with falling incomes and GDP, tax revenue is set to decrease without some sort of huge % increase. At some point, investors will get nervous and desire to cash out of these bonds and that will bring down the US gov't.

[NickF1011]

I don't think it looks good at all. I feel the US government is going to default on its debt at some point within a couple years. Consider that nothing has value except for whatever somebody is willing to pay for it. So while housing values are falling, stock market values are fallling, so too can US treasury securities if people feel they can't collect on them. Taxes will need to be raised substantially to pay for all this, and with falling incomes and GDP, tax revenue is set to decrease without some sort of huge % increase. At some point, investors will get nervous and desire to cash out of these bonds and that will bring down the US gov't.

 

Why does the answer need to be tax increases? The answer should be smaller government.

[Ron W.]

I don't think it looks good at all. I feel the US government is going to default on its debt at some point within a couple years. Consider that nothing has value except for whatever somebody is willing to pay for it. So while housing values are falling, stock market values are fallling, so too can US treasury securities if people feel they can't collect on them. Taxes will need to be raised substantially to pay for all this, and with falling incomes and GDP, tax revenue is set to decrease without some sort of huge % increase. At some point, investors will get nervous and desire to cash out of these bonds and that will bring down the US gov't.

 

 

Watching CNN at lunch today McLame said he's going to balance the federal deposite in his first term in office? What the guys got a magic wand and pixie dust?

[AlRozzi]

Why does the answer need to be tax increases? The answer should be smaller government.

 

I agree with you Nick. Smaller government would be a dream come true. But I'm referring to the bailout debacle. How far will it go? How much of the "bubble" can US tax payers pay for?

[AlRozzi]

Watching CNN at lunch today McLame said he's going to balance the federal deposite in his first term in office? What the guys got a magic wand and pixie dust?

 

Wish he would sprinkle some of that dust my way.

[TStag]

I agree with you Nick. Smaller government would be a dream come true. But I'm referring to the bailout debacle. How far will it go? How much of the "bubble" can US tax payers pay for?

 

The Dow is plunging again now. I'm guessing it's because Paulson just said more financial insititutions are expected to fail! I'm not saying we have all the answers in the UK (our bail out plan was nicked off the scandinavians) but at least there is a glimmer of hope that the banks will be encouraged to loan money to each other again..... and I do mean a glimmer.

[NickF1011]

I agree with you Nick. Smaller government would be a dream come true. But I'm referring to the bailout debacle. How far will it go? How much of the "bubble" can US tax payers pay for?

 

If anyone had the answer to that question, they'd be in control of the world. In the end, I think some more bank failures are inevitable, and that it likely won't really be a bad thing long term. You can only bail so much water out of a sinking ship before you head for the life rafts.

[TStag]

If anyone had the answer to that question, they'd be in control of the world. In the end, I think some more bank failures are inevitable, and that it likely won't really be a bad thing long term. You can only bail so much water out of a sinking ship before you head for the life rafts.

 

 

As long as we aren't on the Titanic

[jpd80]

Just by way of comparison, Australia has had strong fiscal and banking regulations in place for years,

we have had 10 years of government surpluses where over $90 billion of public debt was retired.

For the most part it is business as usual for the banks down here, the stock market jumps around

because the world see us as commodoities (Coal/Iron ore/Aluminium) and as a result, the Aussie dollar

has fallen to 70 cents US just like that. That means exports (like Falcon, 2011 Focus) are now cheaper.

 

Once things settle down, investors will be back.

Edited October 8, 2008 by jpd80

[NickF1011]

Just by way of comparison, Australia has had strong fiscal and banking regulations in place for years,

we have had 10 years of government surpluses where over $90 billion of public debt was retired.

For the most part it is business as usual for the banks down here, the stock market jumps around

because the world see us as commodoities (Coal/Iron ore/Aluminium) and as a result, the Aussie dollar

has fallen to 70 cents US just like that. That means exports (like Falcon, 2011 Focus) are now cheaper.

 

Once things settle down, investors will be back.

 

Wow! Maybe I'll have to take a vacation there if the Australian dollar stays that low. I've always wanted to go.

[atomaro]

Wrong forum.......

[NickF1011]

Wrong forum.......

 

Agreed. Still waiting to get my ability to move threads. :boring:

[jpd80]

Wow! Maybe I'll have to take a vacation there if the Australian dollar stays that low. I've always wanted to go.

It will and Summer is upon us now - so come drive a new FG rental from Hertz.

 

I don't see Ford's financial loans being any problem as quite a bit is already serviced adequately.

If replaced by government low interest loans, all the better.

[jpd80]

Wrong forum.......

It's not the wrong forum, you people have a distorted view and need a broader picture.

[NickF1011]

It's not the wrong forum, you people have a distorted view and need a broader picture.

 

Eh, to be fair, this thread should really be in the Automotive Open Discussion or more likely the Off Topic Discussion area....

[TStag]

Eh, to be fair, this thread should really be in the Automotive Open Discussion or more likely the Off Topic Discussion area....

 

Money makes the world go round. Where do you put threads which talk about things which have a direct bearing on Ford, the automotive sector and the world........ Can I suggest we merge this into a thread simply titled financial crisis and put it in as a sticky at the top of this board? That way we recognise the issue has a bearing on Ford but we keep it all together in one thread?

 

This isn't the only thread now.

[NickF1011]

Money makes the world go round. Where do you put threads which talk about things which have a direct bearing on Ford, the automotive sector and the world........ Can I suggest we merge this into a thread simply titled financial crisis and put it in as a sticky at the top of this board? That way we recognise the issue has a bearing on Ford but we keep it all together in one thread?

 

This isn't the only thread now.

 

Well, relate it to Ford somehow. Your original post made no reference to Ford or any automaker whatsoever. I know that the financial crisis will relate to the automakers on some level. Just make the connection to keep it relevant to the category you create it in.

[V8 Ford]

I don't think it looks good at all. I feel the US government is going to default on its debt at some point within a couple years. Consider that nothing has value except for whatever somebody is willing to pay for it. So while housing values are falling, stock market values are fallling, so too can US treasury securities if people feel they can't collect on them.

Not likely. The only time treasury securities ever had confidence issues was in WWII, in which case the debt was much more substantial, was growing at a much faster rate (and was going to continue to increase until the war ended, an indefinite time), and there was the added insecurity of the largest conflict in human history. Even if you factor in the bailout, slow economic growth and continued deficit spending, the debt isn't likely to reach levels high enough for concern.

 

It also should be noted that the bailout was a purchase of assets, so it doesn't add anything to the national debt right now, and won't unless the assets depreciate.

 

Edited October 8, 2008 by V8 Ford

[BORG]

Most Americans have a very broad view of economics and money and one of the reasons most of them are flipping out over the 'bailout" plan. I think the biggest problem here is a lack of understanding and poor communication from the administration. I actually believe this is the one and only time the current admin has taken intelligent and practical leadership on a critical issue.

Edited October 9, 2008 by BORG

[V8 Ford]

Most Americans have a very broad view of economics and money and one of the reasons most of them are flipping out over the 'bailout" plan. I think the biggest problem here is a lack of understanding and poor communication from the administration. I actually believe this is the one and only time the current admin has taken intelligent and practical leadership on a critical issue.

 

Makes me wonder why economics isn't better taught in school. People place so much emphasis on "The Economy", that a recession usually results in unwarranted political disaster for the guys in office (at least the executive figureheads) . You'd think they'd try and protect their asses by making sure the voters are well enough informed that their opponents can't demagogue their way into office. Look at what’s happening right now.

Edited October 9, 2008 by V8 Ford

[NickF1011]

Makes me wonder why economics isn't better taught in school. People place so much emphasis on "The Economy", that a recession usually results in unwarranted political disaster for the guys in office (at least the executive figureheads) . You'd think they'd try and protect their asses by making sure the voters are well enough informed that their opponents can't demagogue their way into office. Look at what’s happening right now.

 

I've always thought that "Home Economics" should be just that: Economics inside your home, not a class that teaches you how to bake cookies. It should teach you how to create a budget, how to balance a checkbook, how credit cards work, how the stock market works, etc.

[jpd80]

Politicians and treasury heads asleep at the wheel for two years saying all is well but then suddenly,

all is not well and bucket loads of cash are thrown at a crisis to protect their rich friends.

 

I just hope small people with mortgages and Detroit gets saved out of this whole mess.

Edited October 9, 2008 by jpd80

[Ford Jellymoulds]

As long as we aren't on the Titanic

 

UK Bailout

 

You are on the Titanic T-Stag you stupid git you live in the UK, the UK government rescue package is costing our small little Island.

 

£500 billion

This will cost every UK Taxpayer who is already up to his eyeballs in Government/Personel debt, we are already the most taxed natation earth.

http://www.dailymail.co.uk/news/article-10...s-fall-red.html

$28,000 your tax bill T-Stag

We had news today that 82 local goverments & a number of police authorities may need bailing out.

http://news.bbc.co.uk/1/hi/uk_politics/7660438.stm

Never mind the damage this will have done to your pensions.

 

Its funny how the Fat bosses of the British Banks with their obscene big bonus's tell us they are worth it and deserve it.

These Bank OVERPAID fat cats preach Capitalism then turn to socialism when it all goes wrong.

http://www.dailymail.co.uk/news/article-10...ial-crisis.html

 

US Bailout

This says it all

Sign of the times: U.S. National Debt clock in New York runs out of digits

 

The financial crisis that has rocked the world over the last few weeks will go down in the history books as changing the face of global capitalism forever.

 

And in New York City the signs of change have already hit Times Square.

 

The U.S. national debt has spiralled so high that the National Debt Clock near Times Square has actually run out of digits to record it.

http://www.dailymail.co.uk/news/worldnews/...uns-digits.html

Edited October 9, 2008 by Ford Jellymoulds