Are the Bankers & Government the only ones to blame?

Ray Palmer

The popular opinion is and will remain that the bankers and the government are to blame.

The problem is it ignores all other contributors. There were lots of people with their hands in the cookie jar. Trades men were earning easily double what they would get now for a days work. They kept upping their rates. This pushed house prices up and also made renovations very costly.
The civil service insisted on bench marking without consideration to security or pensions. Remember all the teachers would be gone to the private sector if the pay rise wasn't made.

People lied on mortgage applications to get more money and got extra credit union loans.

Loans to buy bigger and better, used to be 30% of the cars on my road were new SUVs and I live in a Dublin suburb and these people didn't need such cars.

The insistence on 3 bed semis drove the property boom more so than anything else the banks just facilitated this desire with the builders. Not everybody needed such property or still does. A lot of these new estates were built for demand. Friends of mine often went on about how they could get much bigger places further out and didn't mind the commute. That is a key element to the property boom.

People willing to commute a long distance pay for the fuel and then require all services to deal with the new estates.

Yes the government could have curtailed all this development but people seem to forget what the public were saying. Outrage at refused planning permissions, insistence that the banks loan more, pushing family to go guarantor etc... That was the people and it was easily as many who now blame the government and the banks.

Noreen1

Sergeant wrote: »

Never had more regulation. Acres of it. Whole office blocks in Brussels, Dublin and Frankfurt dedicated to it. Bureaucracy everywhere.

The Government was elected by the voters.

You too can become a member of this mysterious and sinister 'golden circle'.

Did we have regulation pre-2008? Was it enforced? Is it adequate now? For example, what cash reserves does a Bank need to hold vs. loans - and is the risk acceptable?

I'm aware of who elected the Government, thanks - and it wasn't "everyone"!

Finally, I'll pass on joining the Golden Circle, thanks.
I sleep better at night when people who can ill afford it aren't expected to pay my debts (which at the moment consist of household utility bills, btw.)

BizzyC

Noreen1 wrote: »

[/I]No-one is denying that some people over-extended themselves.
However, to lay the blame on an entire population is patently ridiculous, untrue, and is either willful blindness, or pushing an agenda, imo.

If you'd read my posts you'd see that I'm not saying blame is solely on the people.
But that people need to recognize that they're not entirely free of blame.

Solair

Bank shareholders really need to take action against the management who collapsed the institutions too.
There hasn't been enough accountability.

When you think about it, banks are largely owned by small shareholders and via pension funds who have traditionally been very inactive when it comes to the day to day management of the institutions.

Those people need to sue, as the banks basically destroyed *their* shareholdings.

If capitalism were working correctly, that's how those people would be held to account and how management would be kept on its toes at all times.

jackal

kingsenny wrote: »

Someone made an interesting point in saying that population as a whole was as much to blame for the current state of the country as the bankers and government are.

The banks are regulated by the government. The government is elected by the people. Therefore the majority of the voting population of Ireland approved of the light-touch regulation, property boom, and all the other wonderful things that the Bertie/Fianna Fail years brought us.

The overpriced coffee and sandwiches just showed that people were not being careful with their money. But I think there was another angle to the overpriced rubbish that was sold during the celtic tiger. It helped to fuel the myth that if a coffee and sandwich cost the same as in New York, and an apartment in Dublin costs the same as an apartment in New York... Dublin is just like New York!

smash

jackal wrote: »

The banks are regulated by the government. The government is elected by the people. Therefore the majority of the voting population of Ireland approved of the light-touch regulation

Never heard such shit in my life. The people don't even get a say as to who gets what position in the government when a party is voted in.

uch

Latchy wrote: »

.

This means nothing to me ...

Ooooohhhh Vienna....

stoneill

cson wrote: »

At the end of the day, its a mess of seismic fucking proportions that the generations above us have landed us in, and quite frankly they're fucked if they think I'm going paying for it.

This is an important and worrying aspect to the financial crises.
Future generations being forced to pay for the sins of others.

nlgbbbblth

smash wrote: »

Any links to cases like this? I don't believe they exist!

Neither do I. Seven / eight times maybe.

nlgbbbblth

Ray Palmer wrote: »

The popular opinion is and will remain that the bankers and the government are to blame.

The problem is it ignores all other contributors. There were lots of people with their hands in the cookie jar. Trades men were earning easily double what they would get now for a days work. They kept upping their rates. This pushed house prices up and also made renovations very costly.
The civil service insisted on bench marking without consideration to security or pensions. Remember all the teachers would be gone to the private sector if the pay rise wasn't made.

People lied on mortgage applications to get more money and got extra credit union loans.

Loans to buy bigger and better, used to be 30% of the cars on my road were new SUVs and I live in a Dublin suburb and these people didn't need such cars.

The insistence on 3 bed semis drove the property boom more so than anything else the banks just facilitated this desire with the builders. Not everybody needed such property or still does. A lot of these new estates were built for demand. Friends of mine often went on about how they could get much bigger places further out and didn't mind the commute. That is a key element to the property boom.

People willing to commute a long distance pay for the fuel and then require all services to deal with the new estates.

Yes the government could have curtailed all this development but people seem to forget what the public were saying. Outrage at refused planning permissions, insistence that the banks loan more, pushing family to go guarantor etc... That was the people and it was easily as many who now blame the government and the banks.

+1

People being turned down for mortgages on the basis of affordability and saying

"F*ck you. I'll take my business elsewhere" and then borrowing from another institution.

nlgbbbblth

KyussBishop wrote: »

The banks didn't meet any demise either; they have been bailed out.

What a load of crap.

Do you know how many jobs have been lost in Irish-based banks [state-owned and foreign banks] over the last few years?

KyussBishop

nlgbbbblth wrote: »

What a load of crap.

Do you know how many jobs have been lost in Irish-based banks [state-owned and foreign banks] over the last few years?

That's kind of ancillary to the point I was making in my post; the banks are certainly in pretty bad shape, I don't deny that, but they are still there for now, they haven't met their demise.

Three Seasons

KyussBishop wrote: »

That's kind of ancillary to the point I was making in my post; the banks are certainly in pretty bad shape, I don't deny that, but they are still there for now, they haven't met their demise.

Shareholder value has been wiped out, the owners lost billions.

ToddyDoody

It was because we turned are back on Jesus. Religion does nasty things if you turn your back.

bnt

Yep. I'm still shocked by the failures of basic financial literacy that were involved. Taking out 40-year mortgages at age 30, which means assuming that you'll still be working and making mortgage payments at the age of 70. Oh, wait, maybe not, since you'll always be able to sell at a profit, since house prices always go up ... right? Got to get on that "property ladder", since they aren't making any more land, are they ..? :rolleyes:

So people didn't spot the property price bubble, or even if they did, perhaps they thought "I'll sell at the top of the market". Well: by the time it's clear that a bubble market has hit its top, it's too late for people in that market to do anything about it. Try and sell your overpriced asset, and you quickly find that no-one's buying, because everyone knows that the market is going down. Irrational exuberance sent it up ... there's a reason why it's called a "bubble". Pop.

EazyD

stoneill wrote: »

This is an important and worrying aspect to the financial crises.
Future generations being forced to pay for the sins of others.

When people tell me that the recession in the 80's was way worse than current, I ask them are they still paying for it to this day. Because that's what we've been dealt. At least we can be sure on the fact that Ahern and co can't take their handsome pensions to the grave.

jackal

smash wrote: »

Never heard such shit in my life. The people don't even get a say as to who gets what position in the government when a party is voted in.

You have led a very sheltered life, and I do not get your point about who is in what position. Everybody knew what Fianna Fail stood for (self enrichment through property investement) and the majority (not everyone) voted them in, tacitly approving of their economic genius.

"The government" represent the people who elected them. There were very few people shouting "stop the property boom".

Frank Black

true wrote: »

+1.
There are cases where banks lent out 30 and 40 times a person income. Such loans were not sustainable and imho the bankers who made and approved these loans should be charged and jailed.

And what about the people who drew down such loans?
Should they be charged and jailed too for reckless borrowing if they are unable to meet their repayments?

I don't make decisions on the size of loan I'm going to take out on the basis of the amount some bank employee is willing to lend me. I'm going to look at how afforadable it is for me to make the re-payments. I'm going to stress-test the re-payments for higher interest rates, drops in income and changes in my personal circumstances.
A mortgage is most likely the largest sum of money you will ever borrow and you'd want to be very sure as to your capacity to meet the repayments before you draw it down.

Am I just a weirdo for doing this? Did most people just drop into thier lending institute and ask them the maximum amount they would lend them?
For every reckless loan advanced there was a reckless borrower involved.

Rallying cries of charging and jailing bankers are all well and good to release a bit of frustration, but what are you charging them with exactly? How will you prove these charges in a court of law?

By all means let's introduce appropriate regulation and legislation to try to prevent this from happening again. But it would be nice to see Irish people learning from this mess as well. How about an electorate that rewards Governments for prudent economic management of the country as opposed to one that elects the chancers that promise the most? Look at the Shinners, out there whispering in people's ears about how they'll burn the bond holders and abolish the property tax and won't cut Social Welfare or public servant pay. Seems to me that this kind of bull**** works on enough people to make it worth their while.

Unless this changes, we'll probably make the same mistakes in the future.

But sure if it does happen, we'll just charge and jail a few bankers and we'll be grand.

Arcsin

Frank Black wrote: »

And what about the people who drew down such loans?
Should they be charged and jailed too for reckless borrowing if they are unable to meet their repayments?

I don't make decisions on the size of loan I'm going to take out on the basis of the amount some bank employee is willing to lend me. I'm going to look at how afforadable it is for me to make the re-payments. I'm going to stress-test the re-payments for higher interest rates, drops in income and changes in my personal circumstances.
A mortgage is most likely the largest sum of money you will ever borrow and you'd want to be very sure as to your capacity to meet the repayments before you draw it down.

Am I just a weirdo for doing this? Did most people just drop into thier lending institute and ask them the maximum amount they would lend them?
For every reckless loan advanced there was a reckless borrower involved.

Rallying cries of charging and jailing bankers are all well and good to release a bit of frustration, but what are you charging them with exactly? How will you prove these charges in a court of law?

By all means let's introduce appropriate regulation and legislation to try to prevent this from happening again. But it would be nice to see Irish people learning from this mess as well. How about an electorate that rewards Governments for prudent economic management of the country as opposed to one that elects the chancers that promise the most? Look at the Shinners, out there whispering in people's ears about how they'll burn the bond holders and abolish the property tax and won't cut Social Welfare or public servant pay. Seems to me that this kind of bull**** works on enough people to make it worth their while.

Unless this changes, we'll probably make the same mistakes in the future.

But sure if it does happen, we'll just charge and jail a few bankers and we'll be grand.

Few, if any, bankers will be jailed because they didn't commit any crime, especially regarding lending money. Anyone who is convicted will be charged with offences related to manipulating accounts.

But the country is still full of high stool economists calling for "economic treason" charges and other assorted populist bull**** that doesn't exist. As usual empty vessels make the most noise so we will be hearing plenty more

dub_skav

Sure, people over borrowed, but personal financial hardship is not what brought the Troika to our door. It was dodgy dealing by Anglo, actual fraud as opposed to reckless lending.

If the only problems we had were high unemployment and lots of people in negative equity, we would not be fucked, at least not yet. We needed a bailout and brought the IMF here because of the smoke and mirrors game run by Anglo, oh and the government who guaranteed them.

Are the bankers and government the only ones to blame? No, but they are the reason that the problem is as huge as it is.

Grayson

dub_skav wrote: »

Sure, people over borrowed, but personal financial hardship is not what brought the Troika to our door. It was dodgy dealing by Anglo, actual fraud as opposed to reckless lending.

If the only problems we had were high unemployment and lots of people in negative equity, we would not be fucked, at least not yet. We needed a bailout and brought the IMF here because of the smoke and mirrors game run by Anglo, oh and the government who guaranteed them.

Are the bankers and government the only ones to blame? No, but they are the reason that the problem is as huge as it is.

That was part of it. But consider that high house prices were a result of people paying over the odds for a two room semi. They all got loans for those properties. And the banks all have given mortgages for property that is now valued at a fraction of the cost. That means that the banks balance books are in the negative. Plus people got mortgages at a higher repayment rate than they could afford because they assumed the next 20 years would be the same as the previous 7.

Between 96 and 06 I saw houses in my town go from 40k to 400k for the same property(with most of the increase occuring between 99 and 06. But even then the price had doubled by 00.). Even ignoring the changover from punts to euro, that was a stupid increase. Yet everyone accepted that it was natural and would keep on increasing. It was obviously a bubble. It was obvious that it couldn't continue. But people kept on believing it could. It was willful blindness. And that led to the government giving even more tax breaks, to relaxing even more regulations to keep it going.
Everyone who participated in that reckless spending shares partial responsability.

true

nlgbbbblth wrote: »

Neither do I. Seven / eight times maybe.

Do you think if someone has evidence that the bank lent 30 times the persons income should go to the media about it? There was such lending.
The bank obviously made a mistake and would not do it again but I know of one case of such lending. There is no law against it, but obviously such lending was unsustainable and eventually a collapse would occur / the bubble would burst. The bank workers who done that for short term profit / bonuses have a lot to answer for.
Up against a wall and shoot them I say. ( The person or people in charge of lending / who made the decisions - the ordinary counter staff are innocent )

Three Seasons

true wrote: »

Do you think if someone has evidence that the bank lent 30 times the persons income should go to the media about it? There was such lending.
The bank obviously made a mistake and would not do it again but I know of one case of such lending. There is no law against it, but obviously such lending was unsustainable and eventually a collapse would occur / the bubble would burst. The bank workers who done that for short term profit / bonuses have a lot to answer for.
Up against a wall and shoot them I say. ( The person or people in charge of lending / who made the decisions - the ordinary counter staff are innocent )

If they didn't break any laws then why "shoot them"?

People make bad decisions, that's what happened at the banks the owners of the banks suffered the consequences.

The banks don't exist as a public service, they exist to make profit. If you don't like their products then take your business elsewhere.

smash

Three Seasons wrote: »

The banks don't exist as a public service, they exist to make profit. If you don't like their products then take your business elsewhere.

Like to another bank?

Three Seasons

smash wrote: »

Like to another bank?

Yes that's what competition is for.

smash

Three Seasons wrote: »

Yes that's what competition is for.

They're all the same or have you not realised that yet?

true

Three Seasons wrote: »

If they didn't break any laws then why "shoot them"?.

The likes of Fingleton who bed and breakfasted deposits with Anglo at auditing time deceived people. Bank managers who lent people 30 times their income destroyed their lives. Those who sold mortgages which were unsustainable messed up the economy. Maybe they did not break laws as such, but in the selfish greed of chasing bonuses for themselves, their actions have caused untold suffering this past few years in Ireland - not to mention suicides, emigration etc.
I was speaking metaphorically when I suggested "shoot them".

Three Seasons wrote: »

People make bad decisions, that's what happened at the banks the owners of the banks suffered the consequences.
.

The owners of the banks have suffered - I know of pensioners and people who put money away for 3rd level fees for their kids who have seen their life savings disappear.
The unscrupulous bank managers have not suffered the consequences. They still have their big pay + pensions.

Three Seasons wrote: »

The banks don't exist as a public service, they exist to make profit. If you don't like their products then take your business elsewhere.

Tell that to the couple 50 miles from Dublin locked in to a mortgage in an unsuitable dwelling, and who cannot escape.

Three Seasons

smash wrote: »

They're all the same or have you not realised that yet?

Really, tell that to Ulster Banks customers.

Three Seasons

true wrote: »

The likes of Fingleton who bed and breakfasted deposits with Anglo at auditing time deceived people. Bank managers who lent people 30 times their income destroyed their lives. Those who sold mortgages which were unsustainable messed up the economy. Maybe they did not break laws as such, but in the selfish greed of chasing bonuses for themselves, their actions have caused untold suffering this past few years in Ireland - not to mention suicides, emigration etc.
I was speaking metaphorically when I suggested "shoot them".





The owners of the banks have suffered - I know of pensioners and people who put money away for 3rd level fees for their kids who have seen their life savings disappear.
The unscrupulous bank managers have not suffered the consequences. They still have their big pay + pensions.




Tell that to the couple 50 miles from Dublin locked in to a mortgage in an unsuitable dwelling, and who cannot escape.

How do you know the wages of all bank managers over a 7 year period or so.

You ruin your own life when you take out ridiculous loans. Banks don't exist to make you happy, your happiness is your own responsibility. They exist to make profits. It is your responsibility to spend your own hard earned money wisely. Why should any business care if you waste your money, each individual should look out for their own interest first and foremost.

smash

Three Seasons wrote: »

Really, tell that to Ulster Banks customers.

The ones who are now getting hit with fees like all other banks? That's when they can access their money in the first place!

Three Seasons

smash wrote: »

The ones who are now getting hit with fees like all other banks? That's when they can access their money in the first place!

You just missed my point spectacularly. Banks aren't all the same, just look at the sh1t service they give customers. PTSB don't have the same fees as Ulster Bank.

smash

Three Seasons wrote: »

You just missed my point spectacularly. Banks aren't all the same, just look at the sh1t service they give customers. PTSB don't have the same fees as Ulster Bank.

They're all the same in terms of fcuking up the country. Some just did more damage than others!

hatrickpatrick

If it was physically possible to produce as much as people were consuming during the boom, and it's still physically possible (which it always would be, barring natural disasters or actual scarcity of raw material) then nothing should have changed with regard to wealth and spending power.

Our monetary system is supposed to be controlled by production limits, but in practise we've designed one which CONTROLS production limits even when there's no real, physical reason to.

The entire system of currency needs to be redesigned to reflect modern reality, starting with the shambles that is interest bearig central bank credit.

Three Seasons

hatrickpatrick wrote: »

If it was physically possible to produce as much as people were consuming during the boom, and it's still physically possible (which it always would be, barring natural disasters or actual scarcity of raw material) then nothing should have changed with regard to wealth and spending power.

Our monetary system is supposed to be controlled by production limits, but in practise we've designed one which CONTROLS production limits even when there's no real, physical reason to.

The entire system of currency needs to be redesigned to reflect modern reality, starting with the shambles that is interest bearig central bank credit.

Would you like to suggest how this redesigned currency works?

af_thefragile

Three Seasons wrote: »

Would you like to suggest how this redesigned currency works?

Lots of economists have written a lot about a monetary system that doesn't rely on the fractional reserve system of banking.
Boom-Bust cycles are a property of the interest dependant fractional reserve monetary system that primarily exists to exploit people and make the bankers wealthier. Again people at this point will scream out "conspiracy theory boo boo!!!" as if the current system that's in place is so perfect that there is no room for implementing an alternate monetary system and see if it may work better.


On a side note bitcoin is a prime example of why a gold backed monetary system works best. The key is regulation of the supply. Bitcoin has gotten the attention of many economics because it seems to present a kind of a "perfect" monetary system that is self regulated and in theory can never suffer from inflation. This is because the supply of bitcoins is tightly regulated to the degree where again in theory, it shouldn't experience any runaway deflation or inflation and it is virtually impossible at this moment to replicate it. But at the end of the day bitcoin is a virtual currency. It only exists as binary numbers on hard-drives somewhere. If someone were to "pull the plug" or mess with the program, it has the potential of being exploited, which is why economists are still very skeptical at taking bitcoin as a serious from of currency that'll last.

This is the very reason gold was the monetary standard for centuries. Gold is a physical substance that has a unique property in which it undergoes virtually no corrosion over time and thus gold that was mined centuries ago still exists in the same form as it did back then. Its value has remained nearly constant through centuries because its supply has been very limited, due to it being a precious metal. Gold works best because anything more precious like Platinum would be too scarce to be practically used as a currency and anything such as Iron and Copper is too abundant for its supply to be tightly regulated.

There are two factors that destabilise markets. Its either a run away inflation or deflation (such as a "gold rush") and the second factor is interest based fractional reserve banking. Any further than this, its becomes quite complicated to explain how interest leads to market collapse which then leads to inflation and how Bankers take advantage of these to grow bigger through stimulating boom-bust market cycles.

ToddyDoody

No no, God did it. Jesus was angry.

Grayson

true wrote: »

The owners of the banks have suffered - I know of pensioners and people who put money away for 3rd level fees for their kids who have seen their life savings disappear.
The unscrupulous bank managers have not suffered the consequences. They still have their big pay + pensions.

How? If they invested in shares, then it's a gamble. Every junior cert student is taught of the wall st crash. And most living people can remember the smaller crashes that have happened since. Hell, the dotcom bubble burst less than 20 years ago. Shares go up and down. The best thing to do is to diversify a portfolio and even then it's a gamble, just less of a gamble.

And if it was in savings, their money should still be there. Banks haven't gone under except for anglo. And even then personal savings were guaranteed up to a certain amount. Nobody would be left bankrupt.

true

Grayson wrote: »

How? If they invested in shares, then it's a gamble. Every junior cert student is taught of the wall st crash. And most living people can remember the smaller crashes that have happened since. Hell, the dotcom bubble burst less than 20 years ago. Shares go up and down. The best thing to do is to diversify a portfolio and even then it's a gamble, just less of a gamble.

And if it was in savings, their money should still be there. Banks haven't gone under except for anglo. And even then personal savings were guaranteed up to a certain amount. Nobody would be left bankrupt.

you forget people were told that Irish bank hares were " blue chip" shares. People were told the Irish banks were properly funded and properly regulated. People who thought or suggested there may be a drop in property values were told by the Taoiseach of the day to " go off and commit suicide".

Not surprising some people put their savings ( for their rainy day, retirement, kids education or whatever ) in some or all of the different Irish bank shares, as the banks made up most of the value of the Irish stock market, and anyway they were supposed to be the ones who were experts at financial matters.

For your info, some banks sshares are worth less than 1% of what they once were.

And some bank managers still give themselves 800,000 a year.

Noreen1

af_thefragile wrote: »

Lots of economists have written a lot about a monetary system that doesn't rely on the fractional reserve system of banking.
Boom-Bust cycles are a property of the interest dependant fractional reserve monetary system that primarily exists to exploit people and make the bankers wealthier. Again people at this point will scream out "conspiracy theory boo boo!!!" as if the current system that's in place is so perfect that there is no room for implementing an alternate monetary system and see if it may work better.


On a side note bitcoin is a prime example of why a gold backed monetary system works best. The key is regulation of the supply. Bitcoin has gotten the attention of many economics because it seems to present a kind of a "perfect" monetary system that is self regulated and in theory can never suffer from inflation. This is because the supply of bitcoins is tightly regulated to the degree where again in theory, it shouldn't experience any runaway deflation or inflation and it is virtually impossible at this moment to replicate it. But at the end of the day bitcoin is a virtual currency. It only exists as binary numbers on hard-drives somewhere. If someone were to "pull the plug" or mess with the program, it has the potential of being exploited, which is why economists are still very skeptical at taking bitcoin as a serious from of currency that'll last.

This is the very reason gold was the monetary standard for centuries. Gold is a physical substance that has a unique property in which it undergoes virtually no corrosion over time and thus gold that was mined centuries ago still exists in the same form as it did back then. Its value has remained nearly constant through centuries because its supply has been very limited, due to it being a precious metal. Gold works best because anything more precious like Platinum would be too scarce to be practically used as a currency and anything such as Iron and Copper is too abundant for its supply to be tightly regulated.

There are two factors that destabilise markets. Its either a run away inflation or deflation (such as a "gold rush") and the second factor is interest based fractional reserve banking. Any further than this, its becomes quite complicated to explain how interest leads to market collapse which then leads to inflation and how Bankers take advantage of these to grow bigger through stimulating boom-bust market cycles.

Precisely this.
This is the great big white elephant in the room, that those who defend the current system to the death seem to consistently ignore.

Apart from the fact that the fractional reserve wasn't regulated in the first place, in the absence of a new financial system, fractional reserve banking needs to be discussed - and, imo - controlled much more strictly.

The fact that we hear no such discussion from the so-called experts would lead me to suspect that there is no serious intent to ensure that such a "bust" must never be allowed to happen again - for all the "attempts" to solve the crisis.

Sergeant

Noreen1 wrote: »

Precisely this.
This is the great big white elephant in the room, that those who defend the current system to the death seem to consistently ignore.

The great big white elephant in the room is that we spend €12 billion more than we take in.

Any ideas as to how we get rid of that inconvenience?

Grayson

true wrote: »

you forget people were told that Irish bank hares were " blue chip" shares. People were told the Irish banks were properly funded and properly regulated. People who thought or suggested there may be a drop in property values were told by the Taoiseach of the day to " go off and commit suicide".

Not surprising some people put their savings ( for their rainy day, retirement, kids education or whatever ) in some or all of the different Irish bank shares, as the banks made up most of the value of the Irish stock market, and anyway they were supposed to be the ones who were experts at financial matters.

For your info, some banks sshares are worth less than 1% of what they once were.

And some bank managers still give themselves 800,000 a year.

But all shares are gambling. You only put money in because you think you'd make more than you would in a savings account. And if you do that, you are gambling.

Noreen1

Sergeant wrote: »

The great big white elephant in the room is that we spend €12 billion more than we take in.

Any ideas as to how we get rid of that inconvenience?

What on earth does our current deficit have to do with whether or not fractional reserve banking is the best possible system we can come up with?
The thread title is "Are the Bankers and Government the only ones to blame" - not how we get rid of if an inconvenient 12 Billion deficit.

Actually, I've several ideas on how we get rid of that "little inconvenience" - but I'm more concerned with ensuring that we don't periodically end up generating such "little inconveniences" in the first place!

true

Grayson wrote: »

But all shares are gambling. You only put money in because you think you'd make more than you would in a savings account. And if you do that, you are gambling.

you could argue that putting money bin a savings account is also gambling, because you think you'd make more than you would putting it in a tin box under the bed.

the irish bank shares were "blue chip" shares, and they were supposed to be regulated by the hundreds of people employed ( at great taxpayers expense ) in the central bank and regulators office.

a 20% or 40% driop in value of some or all the banks would have been acceptable, but to see them all decimated? Not good enough, esp when the regulator, bank managers etc all escape scott free. One even is in the news today for his 800k salary.

People have been kneecapped in this country for less

Sergeant

Noreen1 wrote: »

What on earth does our current deficit have to do with whether or not fractional reserve banking is the best possible system we can come up with?
The thread title is "Are the Bankers and Government the only ones to blame" - not how we get rid of if an inconvenient 12 Billion deficit.

Actually, I've several ideas on how we get rid of that "little inconvenience" - but I'm more concerned with ensuring that we don't periodically end up generating such "little inconveniences" in the first place!

No, I've read the thread. It's the practical solutions as to how we move between the deficit and an end to fractional reserve lending that I'm having difficulty understanding. It's all a wee bit vague.

mikeym

Dont forget the property developers.

af_thefragile

Sergeant wrote: »

The great big white elephant in the room is that we spend €12 billion more than we take in.

Any ideas as to how we get rid of that inconvenience?

And what exactly caused us to end up spending €12 billion more than we take in?

A strong economy doesn't need to rely on government loans or bonds to run. Why do governments seem to end up in cycles of inescapable debt?

In a non interest based gold backed economy (one that doesn't suffer from inflation), if the government borrowed a million euros to fund some project such as a new motorway, then if the government spent the money efficiently, it'll soon get back its return of investment and can pay off its debt.

In an unstable fiat economy, when the government borrows a million euros, it needs to pay an addition 100k or so as interest. Then if there's an economic collapse, which happen often to such economies, suddenly the government is unable to pay off the dues in time. Another major factor that plays in is that of democratic governments. One government comes in borrows millions to build some infrastructure which would bring it into favour with the public. Once the government's term runs out, now when the next government comes in, it suddenly has to deal with the debt amassed by the previous government. Rather than making the country suffer in austerity, which is pretty unfavourable for the public, new government decides to take another loan to pay off the previous loan and continue where the previous government left off to keep the public happy. Now the government has two loans to pay off and the interest that keeps building up on these two loans. And over time governments end up finding themselves in big debts. Economic collapse simply add to this debt to ensure governments remain in the cycle of debt dependency.

I acknowledge I haven't explained this properly and succinctly enough here and that's because the way modern economics works is extremely complex and I don't have enough knowledge to explain how exactly A and B lead to C and D. There are many economists out there who can do a much better job explaining all these processes. Look up Peter Schiff for a start. He was warning people of an impeding economic collapse way back in 2004-2006 and everyone called him crazy back then only to later find out how wrong they were!

true

mikeym wrote: »

Dont forget the property developers.

they did not make the rules on bank lending.


A tramp or "property developer" can walk in off the street, or be approached by a bank, and ask for or be offered xy million for some project. You cannot really blame the person for asking for the money, or blame the person for taking the call from the bank. It was the banks job to evaluate if the loan was sustainable / likely to be repaid. Sometimes the banks gave out money without wondering how it was to be repaid.

Sergeant

af_thefragile wrote: »

And what exactly caused us to end up spending €12 billion more than we take in?

A strong economy doesn't need to rely on government loans or bonds to run. Why do governments seem to end up in cycles of inescapable debt?

In a non interest based gold backed economy (one that doesn't suffer from inflation), if the government borrowed a million euros to fund some project such as a new motorway, then if the government spent the money efficiently, it'll soon get back its return of investment and can pay off its debt.

In an unstable fiat economy, when the government borrows a million euros, it needs to pay an addition 100k or so as interest. Then if there's an economic collapse, which happen often to such economies, suddenly the government is unable to pay off the dues in time. Another major factor that plays in is that of democratic governments. One government comes in borrows millions to build some infrastructure which would bring it into favour with the public. Once the government's term runs out, now when the next government comes in, it suddenly has to deal with the debt amassed by the previous government. Rather than making the country suffer in austerity, which is pretty unfavourable for the public, new government decides to take another loan to pay off the previous loan and continue where the previous government left off to keep the public happy. Now the government has two loans to pay off and the interest that keeps building up on these two loans. And over time governments end up finding themselves in big debts. Economic collapse simply add to this debt to ensure governments remain in the cycle of debt dependency.

I acknowledge I haven't explained this properly and succinctly enough here and that's because the way modern economics works is extremely complex and I don't have enough knowledge to explain how exactly A and B lead to C and D. There are many economists out there who can do a much better job explaining all these processes. Look up Peter Schiff for a start. He was warning people of an impeding economic collapse way back in 2004-2006 and everyone called him crazy back then only to later find out how wrong they were!

Peter Schiff? A believer in the Austrian School? He believes that the crisis is primarily caused by Government squandering other peoples money and making monumentally stupid decisions as a result.

I wouldn't use his theories as a cornerstone to develop a theory on how to end the fractional reserve system.

af_thefragile

true wrote: »

It was the banks job to evaluate if the loan was sustainable / likely to be repaid. Sometimes the banks gave out money without wondering how it was to be repaid.

Banks do that all the time. Its how the banking system works. Banks need to give out loans to grow or else the fractional reserve banking system completely collapses and Banks will never be able to grow or compete.

In fractional reserve banking debt = capital. The more loans the banks give out, the more interest it amasses and then the more 'reserve' the bank can create on that interest.

So when a bank gives out a €100k to a person, the person then owes the bank €100k + interest. To keep things simple lets say the bank charges 10% interest on the loan, the person now owes in total to the bank €110k in total. The bank has earned €10K in interest as its "profit". It doesn't matter at this point the bank doesn't physically have the €10K in its treasury. All that matters is that the person owes the bank this €10k and thus the bank's 'reserve' has now increased by €10k. Now on this €10k by the process of fractional reserve banking, the bank can now loan out 10 times as much (in reality banks can loan out much more, investments like hedge funds can be at 300x the times of the reserve or even higher!).

So now through fractional reserve banking the Bank can give out another loan worth €100K on the interest from the previous loan. This new €100K loan will bring the bank another €10K interest and the Bank can give out bigger and bigger loans as it amasses more interest.

Now through all of this, at any point its not required for the Bank to physically have this 'reserve'. Simply the fact that the debtor owes the bank this 'reserve' is enough for the Bank to function and give out loans. So as long as Banks keep giving out loans, no matter how big they are, they can keep giving out bigger and bigger loans and keep getting wealthier on the interest these loans amass. Through Fractional Reserve banking it is absolutely possible for a "Banker" to start out with just a grand in his treasury and end up giving out millions in loans and profit from the interest on all these loans.

In this system as long as the debtors keep paying their monthly dues, the system keeps functioning. The trouble happens if suddenly all of the bank's customers demand their money back at once (as the bank never actually has the capital to pay back all of its customers!) or if there is an economic collapse and suddenly many debtors can't pay back their debt. Banks to go great lengths to avoid the first scenario from taking place. For the second scenario, banks need to pay big bets. Because its the public's money involved here, governments are almost always forced to end up "bailing out" these banks, paying off the public debt to keep the Banks from going bust and thousands of people to lose their savings. It is also to note here Bankers invest a lot of time lobbying with governments so that if such a scenario does take place, the governments come to their rescue. This is what makes Banks "too big to fail" and makes Bankers ridiculously wealthy throughout all history!

The most significant aspect of this system is that the "interest" wealth doesn't exist at all. All the wealth that exists is what the banks give out from their reserves or as multiples of their reserves. The "interest" by its design can never be paid off in wealth because the wealth to pay off this interest simple doesn't exist. Thus to pay off the interest economies need to continuously keep taking loans which bring with them even more interest. Its a vicious cycle. This works on a collective level when you factor in the whole economy connected to the Bank(s). Individuals aren't directly affected by this as many can make big money through this process themselves (such as through hedge funds). Its the economies that collectively suffer because they have to end up facing austerity to pay off the loans so you get the rise in taxes, inflation, collapsing markets, unemployment, even more taxes and all.

srsly78

You seem to be confused about a lot of things. Hedge funds are not the same as banks. Leverage is not the same as fractional reserve lending.