BAILOUT WILL NOT WORK: Severe misallocation of capital resources has had occured - primarily caused by the Federal Reserve's decision to keep interest rates artificially low to prevent the economy from going into recession in 1996, 2001, 2003 and 2008. The easy money turned into nonproductive and risky investments, so that the produced assets have inflated paper value. http://www.wnd.com/index.php?fa=PAGE.view&pageId=77802 The actions that are being done, like worldwide additional lowering of the interest rates, continue andding to the problem, instead of fixing it. INSTEAD: CDS, credit defult swaps mutual insurance, must be declared NULL AND VOID. Banks must be let go bankrupt, THEN nationalized. http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/ Interest rates must be fixed at inflation rates, 3% at US. THAT WOULD WORK, SO WHY DO NOT DO IT? eS
Thats almost what Paul Volker did when he was Federal Reserve chairman in the 1980s. Inflation peaked at 13.5% in 1981. Volker raised interest rates into the double digits and brought inflation down to 3.2% two years later. Bernanke's NOT going to do that. Hes going to follow the Japanese example of 1990-2003, keeping rates low and dragging out the slump for years.
When a bank goes bankrupt, what happens to people's savings? Besides, the housing bubble is already over, low interest rates don't mean much if you can't get a loan in the first place.
Savings are guaranteed by the Federal Deposit Insurance Corporation up to $100,000. When IndyMac blew up, over 10,000 of their clients had MORE than $100,000 in deposits.
spidergoat it depends on the country. In australia the first 100,000 (i think) is refunded by the goverment who will latter claim it back out of the assets of the bank. However by law depositors are priority creditors, therefor when the assets are devided the remaining deposits here are paid back BEFORE any one else (like other banks loans) gets anything. lastly for the next 3 years ALL money in a bank (be it a loan or a deposit) is 100% garentied. I THINK this includes money from overseas at the moment that is lent to australian banks.
I wouldn't say over, more being transplanted somewhere else and becoming even bigger. Remember that bubbles are caused by expansions of the money supply. What's the Fed doing to correct the popping of the housing bubble? Expanding the money supply even more.
I'd also like to point out that this worry, which is on many people's minds, is only one half of what people should be worrying about. The monetary amount of your savings is important, yes, but what does that matter if the value of the actual money your savings are in drops? Does it matter if you still have $500k in your bank account 5 years down the line if it can only buy half of the things it could 5 years ago?
Your point is lost on most members of society these days. If I didn't know better I'd think the concept of inflation has been omitted from public education. They probably replaced it with the Carver guy who worked with peanuts.
I heard recently that in UK it is guaranteed up to £50,000. But no, I don't live in UK. In Ireland, all savings are guaranteed 100% until September 2010. So, in case you have any saving... move it to Ireland already! J/K
In all seriousness, if a couple of the Irish banks should prove to be hiding massive holes in their finances, it would be all the Irish Government could do to bail them out. (Though the situation would be nowhere near as bad as Iceland.) Don't invest in Irish Treasury Bonds!
