Re: Financial Collapse
Garrett said:
We are supposed to be in a free market system. If we allow the people who make bad choices fail, then the market will correct itself in record time. The only reason the market hasn't recovered is because our wonderful government keeps putting their hands in it in the wrong places.
Lol, so you suggest that we wait for a few more banks to get wtfpwned, and have everyone do a run on the bank...
I think we should talk plainly here, the global economy is in recession. If we want to deal with this, and solve the problems asap, we need to have health financial institutions. Normally I would agree with you, let the financials be sick, let the weaker banks die or be eaten by the larger/healthier banks, and that way reward companies with healthy policies.
But the fact is that the industry is in trouble as it is, and a recession at this moment would be catastrophical for some gigantic American companies (GM & Ford spring to mind here, if the carmarket doesn't get back on track fast, they're dead and just imagine how many people would lose their jobs that way). And the only way to solve this, is through the financial markets, through cheap loans etc. But since the banks don't have any liquidities (being cash, don't know if it's liquidities in english too), they're not eager to hand out loans, and especially not to companies who come even close to actually needing loans, because they're risky business.
Second reason why the government needs to intervene, is, and I don't know if that's a major issue in the US, but it definitely is in Europe, that the negative publicity banks get these days, increases the danger of runs on banks. Just this weekend the largest bank in Belgium, the Netherlands and Luxembourg has had a capital injection of 11.5b Euro, imho mainly because they were being targeted by the press, and people were starting to withdraw their savings. If the government hadn't intervened this weekend, that bank would've been dead today due to a run on the bank.
So the government needs, at the very least, to give a 100% guarantee on savings, to make sure people don't do these run on banks, because the slightest rumour at this point can cause a catastrophe for a bank (imho all analysts who make these kind of rumours, should be shot).
Anyway, just like to say it's not all as black and white and easy as you try to make it look Garrett, there are quite good reasons for the government to intervene in the financial market (Because there's imho a large difference between a bank and a normal company, see reason 2 for why I think that).