A brief follow-up on the bail-out.
- The problem with not bailing out the banks is that while Government guarantees can sustain the collapse of one, possibly a handful, of the major banks, if they topple as per the proverbial dominoes this may not hold true. This is rather moot, though, as (in the UK at any rate) we’re running a significant savings deficit. The real issue isn’t guaranteeing deposits, it’s sustaining credit: small and large businesses alike would go under rather quickly if lines of credit were rapidly withdrawn. This, in turn, would lead to a massive increase in unemployment and saddle the public purse with an even greater burden to sustain.
- It’s not strictly true that the markets would bounce: it’s reasonable to say I that I was glossing over the details somewhat.
- Interestingly, though his perspective is distinctly of that of someone who has plenty of cash and has put it somewhere safe from the general turmoil, Jim Rogers was interviewed on Bloomberg on Friday and took exactly my position (though he used the words “tough couple of years”, and I’m pretty sure that spells seriously bad news for consumers).
- I’m slightly bemused by the way that finance and market-oriented publications talk about the crisis spilling over into the “real economy”. Not really sure where to start with commenting on that one.