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The Real Cost of the 2008 Financial Crisis

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Re: The Real Cost of the 2008 Financial Crisis

#21

Post by m_st »

sampo wrote: post #11
nafey wrote: post #2

But what was the alternative to the bailouts? Another depression? I feel we made it across fairly well.

The Wikipedia article has a list of proposed alternatives. https://en.wikipedia.org/wiki/Emergency_Economic_Stabilizati... Especially I'd like to point out the one proposed by Paul Krugman. Instead of injecting money into the banks, the government invests the money in the banks, diluting the previous shares. After the crisis, the government starts selling their shares, getting at least part of the money back. https:/…

To my (amateur) understanding, that's what they did in Switzerland and it turned out pretty well for the national bank.

Personally I also made some smallish stock investments during that time. I only regret that I didn't invest just a little more... the profit is/was huge.

Re: The Real Cost of the 2008 Financial Crisis

#22

Post by imtringued »

nafey wrote: post #2

But what was the alternative to the bailouts? Another depression? I feel we made it across fairly well.

If there was no bailout then even people who were paying their mortgages on time would be affected. The bank needs money now so it will have to sell some of it's assets such as the house you're living in but 5 years later it is probably swimming in money.The government effectively acts as a very large insurance company by giving the bank a loan.

Re: The Real Cost of the 2008 Financial Crisis

#23

Post by petra »

simonh wrote: post #7
brobdingnagians wrote: post #3

Earlier quoted context omitted.

We haven't escaped the depression; the bailouts and quantitative easing simply delayed it for a bit, and the more it is delayed, the worse it will be. It would be far better to have economic corrections along the way with little dips than to keep the house of cards going on worse and worse foundations until it all falls apart in a large depression. Little distortions can be corrected in the short term, but keeping th…

Sure, but allowing half the banks to fail would not have lead to a little dip. The collapse of Lehmans was very damaging for many perfectly healthy, well managed firms that depended on them. The only reason the effects were not worse was that there were other banks around to pick up the pieces, but if the domino effect had been allowed to play itself out the dramatic loss of capacity in the banking sector would have…

I don't think we've even begun seeing the terrible results of QE , at least in Europe.

QE's long-term effect on housing prices will probably be terrible on many people wanting to purchase an appartment, possibly leaving many without one.

And on the other hand, QE created such a boom in startup investing, which will greatly increase the rate which jobs will be automated.

I can't see how this ends well over the long term.

Re: The Real Cost of the 2008 Financial Crisis

#24

Post by oh_sigh »

tokyodude wrote: post #20
nafey wrote: post #2

But what was the alternative to the bailouts? Another depression? I feel we made it across fairly well.

I haven't a clue about the whether the bailouts were important or not. What I feel like I would have liked is for the bailouts to happen AND the top 20 to 100 people from every financial institution to have gone to prison for at least 10 years. The president of Goldman Sachs, the president (or ex-President) of Lehman, etc... etc... What it seems like from the outside is they screwed the world over and completely got…

Did those people do anything wrong or were they just essentially incompetent or not adequate for the job? Bonus clawbacks after government bailout are one thing but jailing people who probably didn't do anything criminal is a dangerous precedent.

Re: The Real Cost of the 2008 Financial Crisis

#25

Post by TheOtherHobbes »

thecopy wrote: post #5
brobdingnagians wrote: post #3

Earlier quoted context omitted.

We haven't escaped the depression; the bailouts and quantitative easing simply delayed it for a bit, and the more it is delayed, the worse it will be. It would be far better to have economic corrections along the way with little dips than to keep the house of cards going on worse and worse foundations until it all falls apart in a large depression. Little distortions can be corrected in the short term, but keeping th…

> We haven't escaped the depression; the bailouts and quantitative easing simply delayed it for a bit, and the more it is delayed, the worse it will be. How so?

The economy has become an absolutely horrific place for most of the population. Financial security is an unrealisable dream for most workers.

Bailouts saved the economy for the proverbial 1%, who are doing wonderfully. But no one else is. (I'm including many HN readers in the 1% because they work in a privileged and relatively highly paid part of the job market.)

When the mountain of debt finally implodes, it's going to be far worse than 2008.

This is very different to - say - the 50s and 60s - when ordinary working people could accumulate significant assets by working hard and saving.

Re: The Real Cost of the 2008 Financial Crisis

#26

Post by tonyedgecombe »

swarnie_ wrote: post #17
simonh wrote: post #7

Earlier quoted context omitted.

Sure, but allowing half the banks to fail would not have lead to a little dip. The collapse of Lehmans was very damaging for many perfectly healthy, well managed firms that depended on them. The only reason the effects were not worse was that there were other banks around to pick up the pieces, but if the domino effect had been allowed to play itself out the dramatic loss of capacity in the banking sector would have…

> Note that the bailout money wasn't simply gifted with no strings, it was leant and paid back with a profit to the tax payer. I can't comment if this is true in America but in the UK we've been selling off bailed out assets at a loss. Sales seem to be timed for political points not to maximize profit.

Not much, we dumped Lloyds because it was profitable, we can't let go of RBS because we will make a loss. This is loss aversion on a nationwide scale.

Re: The Real Cost of the 2008 Financial Crisis

#27

Post by seanmcdirmid »

tokyodude wrote: post #20
nafey wrote: post #2

But what was the alternative to the bailouts? Another depression? I feel we made it across fairly well.

I haven't a clue about the whether the bailouts were important or not. What I feel like I would have liked is for the bailouts to happen AND the top 20 to 100 people from every financial institution to have gone to prison for at least 10 years. The president of Goldman Sachs, the president (or ex-President) of Lehman, etc... etc... What it seems like from the outside is they screwed the world over and completely got…

Sending people to prison involves prosecuting people for breaking laws somehow, which isn’t easy. You can’t just send them to jail on a whim. Even if what they did was wrong, unless there was a law against it the government didn’t really have many options here. They could make up some laws after the fact to prevent future abuse, but cannot make them retroactive.

Re: The Real Cost of the 2008 Financial Crisis

#28

Post by s3krit »

oh_sigh wrote: post #24
tokyodude wrote: post #20

Earlier quoted context omitted.

I haven't a clue about the whether the bailouts were important or not. What I feel like I would have liked is for the bailouts to happen AND the top 20 to 100 people from every financial institution to have gone to prison for at least 10 years. The president of Goldman Sachs, the president (or ex-President) of Lehman, etc... etc... What it seems like from the outside is they screwed the world over and completely got…

Did those people do anything wrong or were they just essentially incompetent or not adequate for the job? Bonus clawbacks after government bailout are one thing but jailing people who probably didn't do anything criminal is a dangerous precedent.

There exists the concept of criminal negligence. I would say being in the wrong and being incompetent are not mutually exclusive.

Re: The Real Cost of the 2008 Financial Crisis

#29

Post by tonyedgecombe »

teekert wrote: post #10
simplemts wrote: post #4

Earlier quoted context omitted.

Debt is worse now than in 2008. We haven't / didn't escape anything, just passed it on to future generation(s). Future generations will be paying the bill for mistakes of their parents.

Will they pay the bill or will they revolt? I feel it is time for some of the latter.

The trouble with revolutions is you end up with a new set of leaders, who may well be worse than what you have now.

Re: The Real Cost of the 2008 Financial Crisis

#30

Post by heavenlyblue »

oh_sigh wrote: post #24
tokyodude wrote: post #20

Earlier quoted context omitted.

I haven't a clue about the whether the bailouts were important or not. What I feel like I would have liked is for the bailouts to happen AND the top 20 to 100 people from every financial institution to have gone to prison for at least 10 years. The president of Goldman Sachs, the president (or ex-President) of Lehman, etc... etc... What it seems like from the outside is they screwed the world over and completely got…

Did those people do anything wrong or were they just essentially incompetent or not adequate for the job? Bonus clawbacks after government bailout are one thing but jailing people who probably didn't do anything criminal is a dangerous precedent.

If they are incompetent and they have consciously taken the positions they hold - then they are liable. Finance isn't "revolutionary" tech - there isn't much you can do that requires high risks and actually rewards you in the long run.

I would wonder what you'd say about a general who didn't know that using chemical warfare is a possible tribunal scenario.

We have a similar legal case in maritime law, where captains can be sued for anything that happens on their ships. If you can't take on that role and it's liability - then you shouldn't be the captain.

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