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Originally Posted by Chrysalis
of course. confidence is the be all and end all.
If the banks were allowed to go bust and a new era started, then I think we would at this time be on the road to recovery.
But instead the government(s) patched up the current system and the population has lost faith in that system. Most notably as ignition said they sacrificing growth and wealth so those in debt can inflate away their debts which is mainly homeowners and the government itself. This country is too addicted to the property market and it needs to let go and let a property crash (correction) happen. Problem is too many influential people in both the media and government, as well as probably corporate have vested interests in property.
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The banks cannot be allowed to go bust under any circumstances.
There was a secondary banking collapse back in the 79\80's. The secondary banks were primarily involved with businesses and specialised in loans and dealing with non mainstream type deals. Their demise caused quite a few major businesses to go to the wall.
Collapses in the primary banking system would see thousands and potentially hundreds of thousands of ordinary people and many mainstream businesses going bankrupt overnight. Banks are the arterial flow of the lifeblood of the country and are trusted to hold in safety and facilitate transactions on behalf of everybody in the country. With them going bust we not only go back centuries in transaction capabilities but would become a third world impoverished country in the blink of an eye.
The problem that led to the banking crisis was the removal of protections in the mainstream banking sector which had been long seen to be a problem in brokers dealing with private traders accounts. Brokerages were able in the past to use client funds for in house trading and if they went seriously wrong could lose their money plus that placed with them by private individuals. One private trader could also rack up losses beyond what they could pay and take down the accounts of everybody else plus the broker.
Segregation was brought in as an option to place client funds where the broker could never touch the clients money and safety nets were also put in place to protect clients against the actions of other clients.
Having explained what I witnessed and on occasion was involved (innocently) with in the brokerage business, compare and contrast what the high street banks did when Labour facilitated America's desire for change.
In the past all the high street banks could do with clients money was retail banking plus parking surplus in government money at Libor rates. 100% safe .
In 1999 the USA repealed (discarded) the Glass-Steagall act which had ensured banking separation of funds into private and tradable since 1933. It had been created to protect the public post the carnage of the USA collapse into financial horror and depression in the 30's and they took the protection away and we followed suit.
Labour didn't stop to think that what had been seen as a cause for financial catastrophe may lead to another but as sure as night follows day it did.
Ironic that the government is now calling for laws to separate banking activities when time tested laws were in place for 66 years but were thrown away by Labour (at the desire of the USA).
We have to get back to banking segregation where they can no longer see client funds as a cash cow other than via Libor but unfortunately the almighty mess that they have managed to get themselves into will have to be bailed out if anybody ever works out who owes who what.
The Leeson affair was a drop in the ocean compared with the fiasco the banks are in. You may wish to see housing prices go down but I can assure you with total certainty that if the full extent of the problems were unleashed in a major banking collapse, owning a house would not be priority. Surviving the aftermath would prove to be much more of a priority as the country would be rather more than ruined. We have no choice but to pay the gambling losses of probably the biggest bunch of losers the world has ever known.