I love the Credit Crunch

I personally think it's disgusting that this situation has been allowed to occur by our government and the BOE, etc. I appreciate that the government is guaranteeing people's savings as it would be unfair for the banks to collapse taking people's hard earned with them; but I will be paying for this out of my taxes for the rest of my life. And then I'll have no state pension at the end of it.

Answers on a postcard.

It's a very big mess.

Originally Posted by cartwrim

Yes but picking up from what Ed said and using your example, it doesn't matter how much the bank invested, they all made a profit. So they all got their investment back plus some extra, ie, they put their £10 in and got their £11 back.

They didn't make a loss.

Of course it matters how much the bank invested. A small bank needs a small profit, a big bank needs a big profit. If it doesn't get it then it can't grow, if it can't grow the shares aren't going to go up in value and they won't pay a dividend, so there's no point having them. If the shares have no value then the bank folds.

[Gazza77]

Originally Posted by cartwrim

I personally think it's disgusting that this situation has been allowed to occur by our government and the BOE, etc. I appreciate that the government is guaranteeing people's savings as it would be unfair for the banks to collapse taking people's hard earned with them; but I will be paying for this out of my taxes for the rest of my life. And then I'll have no state pension at the end of it.

Answers on a postcard.

It's a very big mess.

You're right it is a big mess. You might benefit though if the shares the government have taken in banks bring a decent return, which given time they might.

Originally Posted by cartwrim

Yes but picking up from what Ed said and using your example, it doesn't matter how much the bank invested, they all made a profit. So they all got their investment back plus some extra, ie, they put their £10 in and got their £11 back.

They didn't make a loss.

But (and to take this example to clarify what FS was saying) if you invested £10, got back £11, but inflation was at 20%, you would lose money, while still making a profit. Context.

I love the way everything is trying to be seperated out by the media.

Taxpayers, shareholders, greedy bankers...

If you have a pension, then your pension fund would be a shareholder in the "greedy bankers", and while the going was good, you made a nice profit. Now it all turns to 5hit and everyone looks to find out who got it wrong. Anyone who ever forgot that "Investments can go up as well as down" and "There's no such thing as a free lunch" is who.

Originally Posted by Flamin_Squirrel

Of course it matters how much the bank invested. A small bank needs a small profit, a big bank needs a big profit. If it doesn't get it then it can't grow, if it can't grow the shares aren't going to go up in value and they won't pay a dividend, so there's no point having them. If the shares have no value then the bank folds.

Maybe I didn't word my reply correctly, I meant using the example, it didn't matter how much was invested. But the fact remains, as Ed said, that these banks made a profit; and all of a sudden they are collapsing because that profit was gained on risky trading conditions. A big bank doesn't need to make a big profit, or grow. It wants to, because the directors / managers and shareholders want to get richer, ie, they are greedy. If people were satisfied with a little bit of growth then it could be sutsainable.

Originally Posted by rigor

But (and to take this example to clarify what FS was saying) if you invested £10, got back £11, but inflation was at 20%, you would lose money, while still making a profit. Context.

I completely appreciate what you're saying and of course you are correct there. But why is the inflation at 20%? Because people were getting richer, borrowing and spending more money and creating the bubble. IIRC correctly from my economics textbook it is demand pull inflation because people were / are prepared to borrow and spend more in the blind faith that the bubble will not burst.

Originally Posted by cartwrim

Maybe I didn't word my reply correctly, I meant using the example, it didn't matter how much was invested. But the fact remains, as Ed said, that these banks made a profit; and all of a sudden they are collapsing because that profit was gained on risky trading conditions. A big bank doesn't need to make a big profit, or grow. It wants to, because the directors / managers and shareholders want to get richer, ie, they are greedy. If people were satisfied with a little bit of growth then it could be sutsainable.

EVERYONE is, or at some point, will be a share holder, as Rigor points out. By your logic, everyone should stash their pension fund under their matress.

Unbelievable. 20 years of massive growth, and the inevitable hickup of cyclical capitalist economics comes around and everyone wants to revert to communism.

Originally Posted by Flamin_Squirrel

Unbelievable. 20 years of massive growth, and the inevitable hickup of cyclical capitalist economics comes around and everyone wants to revert to communism.

No no no, taking my comment and twisting it to an extreme.

Regarding the economy, there has to be a balance and economic theory says there can be a balnce but unfortunately our 'leaders' wouldn't know where it was if it hit them in the face.

I admit, I'm not clever enough to knowthe answers but I would hope that our illustrious government would.

Originally Posted by cartwrim

No no no, taking my comment and twisting it to an extreme.

Regarding the economy, there has to be a balance and economic theory says there can be a balnce but unfortunately our 'leaders' wouldn't know where it was if it hit them in the face.

I admit, I'm not clever enough to knowthe answers but I would hope that our illustrious government would.

Oh, that comment wasn't aimed at you specifically anyway, it just seems to be the way the general public at large are reacting.

You can't aboish the economic cycle, as much as that idiot Brown seems to think ("end of boom and bust" - hahahaha). Investments are a risk (which incidently, is why you do 'need' profit, otherwise where's the reward for risking your money in any investment). It's rather worrying that this whole risk adverse culture from safety to money seems to be spreading like poison through, well the entire western world, I guess.

FS - surely the point is that banks are happy to make huge sums (however you measure it) and pay dividends one minute and equally happy to pass the begging bowl the next because if we don't bail them out we'll all go to hell in a handbasket.

Hypocrisy in the boardroom.

Usual story. Owe a thousand, it's your problem. Owe a million, it's the bank's problem. Owe a billion, it's the government's problem.