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  1. #181
    nee andante bechimo's Avatar
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    Had the banks been allowed to fail during the onset of the global financial crisis, payrolls wouldn't have been met due to a lack of credit liquidity. If payrolls weren't met, employers including some segments of the government might have had to file for bankruptcy. These employers rely on client income. No credit, many corporate clients would have had difficulty paying their bills, which includes payroll. Banks fail, employers fail, everyone fails.

    Also, with the market losses, the wealthy lost the most at least in unrealised terms unless they panicked and liquidated, hence crystallising their losses. Seniors who relied on the market for their retirement nest egg and funds, would have been in dire straits had the banks been allowed to fail since the losses we saw in the market, weren't even close to might have happened. Also consider the baby boomers of which most haven't retired yet, who invested their retirement funds into the market. They too would have lost everything. Pension funds, 401Ks, all of it was invested in the market.

    If you consider these two largest segments of the population relying on social security to live, social security that wouldn't have been available, who then would have had to support them during their retirement years, especially during a major depression?

    Unimaginable pandamonium would have struck. The depression would have put the Great Depression to shame.

    I had a discussion with a couple of young guys during this time about it. They were both software developers working for the same company. As far as they were concerned, if the banks were allowed to fail, it was no skin off their back since their company was doing so great and had nothing to do with the financial industry. So I asked them how their company invoiced clients and how payroll, accounts payable, receivable and treasury were handled within their firm. They had no idea and didn't care to know. So I asked them if their company drove up to their clients and made them pay cash for their development services and they laughed and said "No way". Then I asked them if their company sent invoices to their clients and they said "yes". Then I asked them how many days their clients had to pay these invoices and the guarantee that the money would come in, in time to meet payroll. They were deathly silent. Duh!

  2. #182
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    Quote Originally Posted by Mystic Tater View Post
    Alex Jones has fetal alcohol syndrome.
    I already called him a boorish oaf, what else do you want from me?

  3. #183
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    Quote Originally Posted by Speed Gavroche View Post
    Eh, government initially permit them to play with money since they almost give them money by constant extending of credit.



    The crisis began in 2007 when investors lost confidence in the subprime market and the first bankruptcy happened. At this time it represented just 2 or 3 % of the securities market, nothing dramatic or catastrophic. But as usual, government came to rescue, and the water continued to boil hidden until the crash came back even bigger in 2008. If government had not reached in 2007, the crisis would'nt had been that hard. Other than that, what explain Lark is true, people hardly saw the branch on wich they are sat, but I don't think it's imposible to solve that with faithfull and virtuous leaders. I was really enthusistic about the Ron Paul campaign in 2008, his son seem fiable too.



    I know!


    Dont worry, your president care over you.

    (By the way, have your pseudonym something to do with your astrological sign? I mean, are you Scorpio on the Zodiac?)
    -True-

    No my pseudonym is based on the 80s movie : Red Scorpion.

    [YOUTUBE="Yg5frun6NWo"]Badass movie[/YOUTUBE]

  4. #184
    Happy Dancer uumlau's Avatar
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    Quote Originally Posted by Jenaphor View Post
    Had the banks been allowed to fail during the onset of the global financial crisis, payrolls wouldn't have been met due to a lack of credit liquidity. If payrolls weren't met, employers including some segments of the government might have had to file for bankruptcy. These employers rely on client income. No credit, many corporate clients would have had difficulty paying their bills, which includes payroll. Banks fail, employers fail, everyone fails.

    Also, with the market losses, the wealthy lost the most at least in unrealised terms unless they panicked and liquidated, hence crystallising their losses. Seniors who relied on the market for their retirement nest egg and funds, would have been in dire straits had the banks been allowed to fail since the losses we saw in the market, weren't even close to might have happened. Also consider the baby boomers of which most haven't retired yet, who invested their retirement funds into the market. They too would have lost everything. Pension funds, 401Ks, all of it was invested in the market.

    If you consider these two largest segments of the population relying on social security to live, social security that wouldn't have been available, who then would have had to support them during their retirement years, especially during a major depression?

    Unimaginable pandamonium would have struck. The depression would have put the Great Depression to shame.

    I had a discussion with a couple of young guys during this time about it. They were both software developers working for the same company. As far as they were concerned, if the banks were allowed to fail, it was no skin off their back since their company was doing so great and had nothing to do with the financial industry. So I asked them how their company invoiced clients and how payroll, accounts payable, receivable and treasury were handled within their firm. They had no idea and didn't care to know. So I asked them if their company drove up to their clients and made them pay cash for their development services and they laughed and said "No way". Then I asked them if their company sent invoices to their clients and they said "yes". Then I asked them how many days their clients had to pay these invoices and the guarantee that the money would come in, in time to meet payroll. They were deathly silent. Duh!
    Good points.

    However, how does one prevent moral hazard, in your opinion, given that "too big to fail" banks won't be allowed to fail?

    The only thing I can think of is a special kind of bankruptcy, in which the assets/loans are guaranteed (i.e., the bank's clients are unhurt), but the banks owners and stockholders lose their assets, which are sold by an intermediate gov't agency to recoup the costs of guaranteeing assets/loans.
    An argument is two people sharing their ignorance.

    A discussion is two people sharing their understanding, even when they disagree.

  5. #185
    ^He pronks, too! Magic Poriferan's Avatar
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    Quote Originally Posted by uumlau View Post
    Good points.

    However, how does one prevent moral hazard, in your opinion, given that "too big to fail" banks won't be allowed to fail?
    To put it vaguely, we could voluntarily do a slow, controlled partial dismantling of these massive institutions and follow it by putting into place new regulation that will prevent a return of the "too big to fail" phenomenon. Unfortunately it looks like we already missed our chance on that one.
    Go to sleep, iguana.


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  6. #186
    nee andante bechimo's Avatar
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    Quote Originally Posted by uumlau View Post
    Good points.

    However, how does one prevent moral hazard, in your opinion, given that "too big to fail" banks won't be allowed to fail?

    The only thing I can think of is a special kind of bankruptcy, in which the assets/loans are guaranteed (i.e., the bank's clients are unhurt), but the banks owners and stockholders lose their assets, which are sold by an intermediate gov't agency to recoup the costs of guaranteeing assets/loans.
    In my opinion, it was a mistake to allow banks and investment dealers to comingle. They should have been kept separate since no amount of chinese walls prevents failure in an economic crash.

    That's what the FDIC was for, although it too would have gone bankrupt since their reserves were a very small percentage of depositers' monies. Very much an overleveraging scenario.

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