Java/J2EE Contractor - Cannot get an interview!

[BarbarianAtTheDoor]

I don't work as an economist, so I'm just saying what my friends told me, but they're telling me that the current crisis in the UK has precious little to do with the US subprime debacle. Northern Rock didn't collapse because it had subprime lending practises, but because the quick and easy money dried up and they overstretched themselves in order to accelerate growth, so when the cheap money dried up, they were in trouble, not having enough money of their own.

What they're saying is that the reason they can't value their portfolios with even their new risk-factors, is that it is unprecedented that market liquidity just freezes up, so they can't create proper empirical models for this scenario.

According to them, it's not about booking losses, but trusting other's monetary positions.

Hence the intervention on the central bank's behalf to provide _some_ liquidity for them. Not that this would adress the central issue, but it's still better than doing nothing.

[TheOmegaMan]

Why should the government provide liquidity ? That would involve government taking a risk that they would not be paid back - as they have done with Northern Rock. That would just fuel reckless lending and that's what caused the problem.

No much better that lending becomes expensive until banks work out their losses.

[BarbarianAtTheDoor]

http://news.bbc.co.uk/1/hi/business/7289815.stm
http://en.wikipedia.org/wiki/Fractional-reserve_banking

If there's no flow of capital between the banks, that leads to deflation very quickly, since money in the economy is made up of two components, the amount of money available (via the reserve rule) and the speed by which it is exchanged. That is why consumer non-spending leads to a stagnant economy.

It is in all our interests for the banks to trade between one another.


It is also in all our interests to know that when you put your money in a bank, that they can't fly off with it to Aruba and spend it on blow and hookers.

Not all problems are solved by the invisible hand, this is especially true for the financial markets. The reason we didn't have a crash like the one in 1929 is that the markets have been heavily regulated since.

And no, the issue is not about banks undercalculating the risks on their investments. It's more about Northern Rock and dodgy overspending practices than anything else.

And that is exactly why it will take years to undo all the damage done, and this is why I can't get a new contract, and why I'll have to move to permiedom.

[TheOmegaMan]

But you are blaming the government for not fixing the problems caused by the greed of the mortgage lenders. Pumping more cash into the economy just increases inflation - we are nearing a crash - the Fed cannot just keep pumping money in without long term effects.

[DodgyAgent]

If the govt want to take the credit when the economy does well then the flip side is that it takes responsibility when the economy doesnt do well. If banks get out of control it is the govts fault for not setting and enforcing the correct parameters. If the govt fails it is the responsibility of all of us for voting them in in the first place.

We got Thatcher because of our indulgence in socialism, and we may now get Old labour (well more anyway) if capitalism goes Nor*s up.

[DodgyAgent]

But you are blaming the government for not fixing the problems caused by the greed of the mortgage lenders. Pumping more cash into the economy just increases inflation - we are nearing a crash - the Fed cannot just keep pumping money in without long term effects.

What else are they meant to do?

[TheOmegaMan]

Why should it do anything ? Let the free market sort it out.

[BarbarianAtTheDoor]

Why should it do anything ? Let the free market sort it out.

If it was up to the free market, we would still have cycles like the ones back in the 1920s-30s, meaning incredible booms followed by serious poverty.

I have to agree with DodgyAgent on this. It is up to the government to guarantee prudent business behaviour, at least to the extent that it doesn't threaten the economy as a whole. You wouldn't want to get rid of the laws guaranteeing other companies honoring your contract, would you?

I am fairly right-wing myself, when it comes to the economy, but back at the uni they taught us how badly it can operate when left on it's own. This is not leftist propaganda, these are historical facts.

I seriously believe we could use a Sorbanese-Oxley act of our own, even though I'm aware that London's recent boom has much to do with the 'lighter touch' policy.

[oracleslave]

If it was up to the free market, we would still have cycles like the ones back in the 1920s-30s, meaning incredible booms followed by serious poverty.

I have to agree with DodgyAgent on this. It is up to the government to guarantee prudent business behaviour, at least to the extent that it doesn't threaten the economy as a whole. You wouldn't want to get rid of the laws guaranteeing other companies honoring your contract, would you?

I am fairly right-wing myself, when it comes to the economy, but back at the uni they taught us how badly it can operate when left on it's own. This is not leftist propaganda, these are historical facts.

I seriously believe we could use a Sorbanese-Oxley act of our own, even though I'm aware that London's recent boom has much to do with the 'lighter touch' policy.

Sarbanes-Oxley

[TheOmegaMan]

We still have cycles - government or no government intervention, and every time there is a downturn the government gets blamed. And everytime there is is an upturn the market cries too much regulation is hurting our profits.

The remedy for moral hazard is that you let those that make mistakes go bust. Sure we must prevent economic collapse - but government intervention raises inflation which in effect means that the general public pays for the greed of the mortgage lenders.