Quote:
Originally Posted by Chrysalis
I will say it again ,take the banks out the picture.
Government wants money lent to business to stimulate economy.
Normally they want banks to do it and bank makes profit from interest.
Banks refuse to give out enough loans to keep government happy.
Soltion tell banks they no longer allowed to lend money to anyone as they been too picky, government directly lends to businesses or the BOE does and they do so at base interest rates or interest free even, take profit out of it.
Banks cry and cry, tough luck just go back to securing deposits.
That 100+billion welfare handout to the banks would have gave a far bigger stimulas if going direct to the population however I do respect it also probably would have pushed up inflation but thats going up anyway regardless.
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If you Google and read the copious amount of information on QE UK style it will slowly become apparent that the hope was that some of the QE money would emerge as cash into the economy and stimulate growth. The fact that it hasn't achieved the objective before does not hold out much hope that it will do it irrespective of the failed prior attempts. Without any other ideas try, try and try again appears to be the the way forward or backwards depending on your viewpoint.
I rather subscribe to the view that nobody who is worthy of borrowing money wants to do so and those that are of dubious worthiness would be rejected by the banks anyway.
Businesses tend only to borrow when they have a reasonable expectation of using such borrowings for growth above and beyond interest costs. Borrowed money has to earn way beyond its cost and in the current environment it obviously cannot so there is no demand.
The public are generally reported as battening down the hatches, paying off debt with any surplus and cutting on spending which is reflected in business reluctance to invest in growth.
The Treasury nor the government has any method of judging credit worthiness of businesses as that area is entirely in the domain of retail banking. I feel sure that if some hair brained idea came about to bypass banks, there would be a queue miles long to borrow money but equally I feel sure that most of the money would vanish into the pockets of Ltd. companies who are no stranger to bankruptcy procedures.
If it were directed to the public it would give some people a fillip but a heck of a lot would vanish into banks as debt repayment or savings.
The nature of the problem is mass psychology. I think it was either Cameron or King who referred to a crisis of confidence in the Eurozone. It may be with the leaders over there but it stalks every household and company over here and possibly in Europe. Cameron and co. cannot preach the virtues of prudence and the people who may or may not listen to them hearing or reading of daily references to an ongoing recession without morale slipping into the abyss.
Too much damage has been done and if anything is to be re-inflated it is a monumental task which needs to be built off mission accomplished which of course is obviously nowhere near the case.
We are between a rock and a very hard place and appear to have a crop of politicians both here and in Europe who are bereft of ideas.