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Tuesday, January 20, 2009

The Shape of Things to Come in Britain

Here's what we have to look forward to under a stimuloid-crazed Obama presidency and Pelosi congress.
The Government's bail-out of the banks in October with £37 billion of taxpayers' money was supposed to have "saved the world", according to the PM, but now it is clear that it has not even saved the banks. Our money kept the show on the road for only three months.

As the Liberal Democrats' Treasury spokesman Vince Cable asks: where has the £37 billion gone? The answer, as Cable knows, is that it has disappeared down the plug hole.

It is finally dawning on the Government that the liabilities of the British banks grew to be so vast in the boom years that they now eclipse the entire economy. Unfortunately, the Treasury is pledged to honour those liabilities because it has guaranteed not to let a British bank go down. RBS has liabilities of £1.8 trillion, three times annual UK government spending, against assets of £1.9 trillion. But after the events of the past year, I wager most taxpayers will believe the true picture is worse.
Borrow, spend, borrow, spend, lather, rinse, repeat.

The best time to get control of your debts is this instant. Instead, we're about to follow in Britain's wake.

3 comments:

  1. Anonymous5:31 PM

    What isn't clear is what you think they should have done instead. Let the banks go belly up?

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  2. I think the government had to insure investor deposits and it was worth running up a deficit to do that. Once that was done, everything's on the table. We're spending more than we earn. That means we need to reduce spending. That leads to lower wages for government employees and, more importantly, lower payouts for people receiving government assistance. I read recently that firing all of the employees of the state of California would not cover even half of our state's deficit. That tells you all you need to know.

    The reality of the situation is this: we borrowed our way into a boom and we've been doing that for decades. It's time to stop that and accept a reduced standard of living until we can earn what we get. This isn't a theory or a policy, it's reality. At some point in time, this will happen and there's nothing you can do to stop it. The sooner we start down that road, the less painful it will be.

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  3. Anonymous7:44 PM

    I wasn't agreeing or disagreeing, just wondering what you thought the policy ought to be. The danger of runs on banks for folks that have more than the FDIC amount in the bank looks real to me; but I've seen others suggest an RTC type organization that unwinds the troubled banks assets after it goes under and making shareholders and big savers take the hit. Unwinding these banks is going to be costly one way or the other.

    Brian

    ReplyDelete