Reply to: Germany gives 100% deposit protection

[AlfredJPruffock]

Can someone explain HOW a country can guarantee 100%? Where can they get the money from? Would it not entail printing a lot of new money and leading to inflationary problems?

Well the Germans have a lot of experience of printing more money leading to hyper-inflation - they are totally spooked at the moment - they had to take action stepin to prevent a panic.

[TimberWolf]

Britain could trump Germany by guaranteeing 110% of deposits. Boomed.

[d000hg]

Can someone explain HOW a country can guarantee 100%? Where can they get the money from? Would it not entail printing a lot of new money and leading to inflationary problems?

[oracleslave]

And taking all steps needed...such as re-employing Mandelson

We're on the path/passport to oblivion

[Ruprect]

I am sure he is monitoring the situation closely

And taking all steps needed...such as re-employing Mandelson

[oracleslave]

Don't forget that there is no longer a boom and bust economy either

I am sure he is monitoring the situation closely

[Ruprect]

Only Brown apparently isn't afraid of that as the UK's economy was based on strong fundamentals.

Don't forget that there is no longer a boom and bust economy either

[AtW]

they are very afraid of the system collapsing

Only Brown apparently isn't afraid of that as the UK's economy was based on strong fundamentals.

[sappatz]

this is de facto nationalisation
this is really scary. there is a bank run going on and they are very afraid of the system collapsing

[BrilloPad]

http://news.bbc.co.uk/1/hi/business/7653317.stm

Helmut follows Paddy in which the State effectively underwrites the whole banking system.

If the banking system is 'so important' then why wasn't it nationalised to start with?

WHS

[AtW]

honest banks will be unable to compete.

[AtW]

You don't understand - banks compete between each other. If bank B offers a higher interest rate than bank A, then people would put their deposits into bank B rather than bank A. If people know their money is 100% safe, they will no longer care about how dodgy the bank is.

It's the job of a regulator to ensure dodgy banks don't have bank licenses! Anyone who takes deposits should satisfy very tight lending criteria so that they don't put deposits at risk. If it's a hedge fund then it is another matter - people who take money in get no guarantees at all, that's why banks should have never been allowed to act like hedge funds.

[AtW]

Would be interesting to watch from the sidelines if this did happen. Can't see it occurring though

Why do you think there are no major lawsuits in this area so far despite huge losses etc? In US people sue for too hot coffee in McDonalds, plenty of baseless suits yet so far no major company did that in relation to kredit krunch, why is that you think?

The reason is simply - people who can sue are sitting on more toxic stuff than they lost so far, they don't want to show how much they have so they try to stay put as lawsuit will only expose them and they'd go bankrupt before court case starts.

In the UK those criminals are likely to get away with it yet again, but in the USA plenty will be jailed soon.

[bored]

No it doesn't encourage it more than current deposit scheme that insures 100% of deposits up to a certain number - if bank collapses it does not matter anyway as the bank itself won't get copensated from the scheme.

What encouraged banks to gamble was lax legislation allowing high leverage derivatives and unchecked investments into property as the result of reckless lending which was result of Greenspan's low rate policy. I've always been pretty dubious about people who lauded Greenspan, it seems to me now clearly that he is one of the key people who are responsible for reckless behavior of banks.

3% of UK depositors who are not fully covered by £50k limit are likely to represent huge amount of money - possibly 50% of all deposits, so if they take money out to Germany (better than Ireland) then UK banks will be shafted big time.

You don't understand - banks compete between each other. If bank B offers a higher interest rate than bank A, then people would put their deposits into bank B rather than bank A. If people know their money is 100% safe, they will no longer care about how dodgy the bank is. Dodgy banks will be able to offer higher interest rates, because they'll find some loopholes in the regulations (there always will be)/purchase some derivatives with hidden leverage etc, and honest banks will be unable to compete.

[oracleslave]

This will happen in the USA first - maybe last too as criminals in the City got used to getting away. The good thing is that a lot of them will implicated in what they did on behalf of US banks, so good thing there is extradiction treaty between UK and USA.

I predict Sarbanes-Oxley act will be used first to jail those scumbags - the fact that junk sub-prime morgages were packaged as AAA debt and then resold is going to be a solid reason for jailing all key people who were involved.

Would be interesting to watch from the sidelines if this did happen. Can't see it occurring though