WI: The US nationalizes and then breaks up the banks in 2008/2009

As it says on the tin - what if the US (or Obama more specifically) decided to take the Icelandic route, and nationalize the banks they had to bail out in 2008 and 2009, later breaking them up before finally privatizing them in 2015-2016 or so?
 
The Democrats would get destroyed in 2010 and in 2012 for pursuing a socialist policy. Say hello to President Romney with a majority in both houses of Congress.
 
Debt is a race between two numbers, growth and percentage of GDP. More debt is not a problem, assuming growth increases so the debt stays the same percentage of GDP.

Iceland has a huge amount of external debt it will not repay, but such could never be done with the USA and China for example. The USA depends on China for cheap consumer goods that raises quality of life for everyone and China depends on the USA for jobs so the working class does not revolt (all Chinese dynasties have fallen once they lose the favor of the peasants). Both sides are acutely aware of this.

Therefore nationalizing the banks the way Iceland did does nothing, unless accompanied with the declaration foreign debt will not be repaid as Iceland did which is impossible for the USA. Equity in the banks is a possibility, like equity in GM, but is a far cry from nationalization. Nationalization is a poor man's fix. Politicians can't lay off because of politics and the election cycle, which is exactly what a business needs to do (cut the fat). It is probably unconstitutional due to the fifth amendment as well.
 
The U.S. didn't need to nationalize. The regulators had the tools to tidily close down the deadbeats without crashing the economy (contrary to what the bailout proponents will tell you:rolleyes:). They didn't do it.:mad: And they spent US$700 billion bailing them out:mad: and got nothing back.:mad:

That US$700 billion, spent on space exploration, would have created hundreds of thousands of high-value jobs & put us closer to a permanent presence in GEO. Obama & his banker cronies threw it away.:mad: (Apologies for the rant.)
 
The U.S. didn't need to nationalize. The regulators had the tools to tidily close down the deadbeats without crashing the economy (contrary to what the bailout proponents will tell you:rolleyes:). They didn't do it.:mad: And they spent US$700 billion bailing them out:mad: and got nothing back.:mad:

That US$700 billion, spent on space exploration, would have created hundreds of thousands of high-value jobs & put us closer to a permanent presence in GEO. Obama & his banker cronies threw it away.:mad: (Apologies for the rant.)

The problem is the "deadbeats" were the banks themselves. Since you sound like a "down-to-earth" guy go ask anyone who runs a business how they get by. It's through line of credit, credit cards and loans. Small and medium business doesn't have mounds of cash laying around to make payroll. It's always a timing issue and often the company has to borrow to make payroll until the next payday. If a business can't make payroll, it goes bankrupt. Business borrow from the banks, not the government. If everything closes up it is Great Depression Mk. II all over again, only this time much worse because of globalization. Small and medium business are almost all the economic growth and new jobs in a first-world country, not the government or multinationals.

If it makes you feel any better money "printed" for the banks is not real money unless it makes it to circulation. Also the more money you print, the less money is worth. If you spend 700 million or one trillion or one quadrillion, the result is the same money is completely devalued. That's why spending a trillion on NASA wouldn't work (an engineer is worth X dollars and there are only so many engineers but if you "printed" 700 million the engineers would be worth that much more), but just printing the money could to force the rich and banks to stop hoarding and spend their money to get the economy going. If they keep hoarding, they lose real value. At least, that's the theory. It's better than any other theory we have short of printing cheques and giving them directly to people. I for one like the idea of printing lots and lots of money during emergencies to force the rich wealthy and well off to spend their hordes of cash. It's the most direct, effective tool central banks have (which by the way is not the government).
 
strangecircus said:
The problem is the "deadbeats" were the banks themselves.
Except the deadbeats weren't all the banks. So you get rid of the likes of AIG & Goldman Sachs & change the rules to keep the others honest. (Actually, just enforce the existing rules.:rolleyes:) The problem is solved, & it doesn't take a US$700 billion dollar gift to the crooks that crashed the system in the first place.
strangecircus said:
If everything closes up it is Great Depression Mk. II all over again, only this time much worse because of globalization. Small and medium business are almost all the economic growth and new jobs in a first-world country, not the government or multinationals.
I have no disagreement with this, but...
strangecircus said:
That's why spending a trillion on NASA wouldn't work (an engineer is worth X dollars and there are only so many engineers but if you "printed" 700 million the engineers would be worth that much more), but just printing the money could to force the rich and banks to stop hoarding and spend their money to get the economy going.
This IMO is economic nonsense. The money spent on the Apollo Program, or on infrastructure, isn't just "minted". It actually creates things, & gets recycled through the economy. Which is why I say it makes more sense than just giving it to the crooks. Given, of course, you've wound up the deadbeat banks & warned the rest.

Did some money have to go into the system? Probably, tho I'm not econ savvy enough to say how much. (My first impulse is to say "none" & see what would happen, but...) Would something like TARP still be needed? I'd say so. Did something like prosecution of the bankers & mortgage lenders who sold the NINJA loans need to happen? Unquestionably.

It's not about doing nothing, it's about doing different.
 
The Democrats would get destroyed in 2010 and in 2012 for pursuing a socialist policy. Say hello to President Romney with a majority in both houses of Congress.

The blood in the water might be so dark that more candidates run than they did in 2012 so even President Romney isn't guaranteed.
 

RousseauX

Donor
The U.S. didn't need to nationalize. The regulators had the tools to tidily close down the deadbeats without crashing the economy (contrary to what the bailout proponents will tell you:rolleyes:). They didn't do it.:mad: And they spent US$700 billion bailing them out:mad: and got nothing back.:mad:

That US$700 billion, spent on space exploration, would have created hundreds of thousands of high-value jobs & put us closer to a permanent presence in GEO. Obama & his banker cronies threw it away.:mad: (Apologies for the rant.)

TARP made a profit for the government actually
 

RousseauX

Donor
I for one like the idea of printing lots and lots of money during emergencies to force the rich wealthy and well off to spend their hordes of cash. It's the most direct, effective tool central banks have (which by the way is not the government).

That's actually a really bad idea because the rich and wealthy holds non-liquid assets which don't get devalued by inflation, whereas your average person holds a lot of cash which inflation will wipe out.

Printing money and mailing every person $5,000 cheque is actually a better idea.

That's why spending a trillion on NASA wouldn't work (an engineer is worth X dollars and there are only so many engineers but if you "printed" 700 million the engineers would be worth that much more)
That's not necessarily a bad thing since central banks has being struggling to induce inflation since 2008
 
That's not necessarily a bad thing since central banks has being struggling to induce inflation since 2008
If you mean the central bank of Venezuela, then sure. Elsewhere the only struggle with inflation has been the reactionary types that have spent six years convincing themselves that hyperinflation is just around the corner.
 
The U.S. didn't need to nationalize. The regulators had the tools to tidily close down the deadbeats without crashing the economy (contrary to what the bailout proponents will tell you:rolleyes:). They didn't do it.:mad: And they spent US$700 billion bailing them out:mad: and got nothing back.:mad:

That US$700 billion, spent on space exploration, would have created hundreds of thousands of high-value jobs & put us closer to a permanent presence in GEO. Obama & his banker cronies threw it away.:mad: (Apologies for the rant.)

We didn't get nothing back--we got all of it back, plus some profit.
 
The General Public have thought space a waste of money for forty years now. (with a lot of justification given the defence benefits and material sciences have slowed down a hell of a lot and most of it is relatively useless trivia about the worlds in our solar system which we cannot live on or exploit in any meaningful way but flamebait aside...) The financial industry employs hundreds of thousands/millions of people and was in complete crisis with many expecting the depression. The Bailout could be done overnight in terms of government. Nationalising would be a drastic and long term project whilst the economy collapsed. Even a giant ass stimulus project solves nothing at all if the economy has already collapsed months before anything happens.
 
That's actually a really bad idea because the rich and wealthy holds non-liquid assets which don't get devalued by inflation, whereas your average person holds a lot of cash which inflation will wipe out.

Printing money and mailing every person $5,000 cheque is actually a better idea.

I would like to respond to this point. My original point was not to promote wealth redistribution or social engineering but spending. If that means average person must spend to keep his wealth, and the wealthy do not hold any non-liquid assets at all, then the purpose is achieved.

That's not necessarily a bad thing since central banks has being struggling to induce inflation since 2008
No that is not, if it happened. However the question becomes is spending hundreds of millions on space the right move to stimulate a economy. The answer appears no, because space and science spending is too slow. Sorry science, I like you but it takes decades to build up scientific acumen and infrastructure.

deathscompanion1 said:
The financial industry employs hundreds of thousands/millions of people and was in complete crisis with many expecting the depression. The Bailout could be done overnight in terms of government. Nationalising would be a drastic and long term project whilst the economy collapsed. Even a giant ass stimulus project solves nothing at all if the economy has already collapsed months before anything happens.

I agree with this. Speed is key to stimulus. The financial industry and banks are key to a working economy, because banks give loans and loans create business opportunities.

ph1138 said:
This IMO is economic nonsense. The money spent on the Apollo Program, or on infrastructure, isn't just "minted". It actually creates things, & gets recycled through the economy. Which is why I say it makes more sense than just giving it to the crooks. Given, of course, you've wound up the deadbeat banks & warned the rest.

Did some money have to go into the system? Probably, tho I'm not econ savvy enough to say how much. (My first impulse is to say "none" & see what would happen, but...) Would something like TARP still be needed? I'd say so. Did something like prosecution of the bankers & mortgage lenders who sold the NINJA loans need to happen? Unquestionably.

It's not about doing nothing, it's about doing different.

Understood, but see speed above infrastructure and space is very slow, too slow to fix a collapsing economy. I accept your warning about moral hazard. However, this might be the only way capitalism works. Big booms, and big busts, followed by government assistance during the bad times the only question to who. Perhaps the cheques should be spread out around the whole economy or the Fed should have the authority to issue stimulus cheques to everyone, independent of politicians. Overlending, overspending and burning out and crashing may be the only way to get this kind of prosperity and lifestyle. You may not like "too big to fail" but it may simply be a fact of life.
 
How to nationalize without spending money? Easy- RICO. Robosigning alone was a major crime, which nobody went to jail for- and the fines were a pittance of the fruits of said crimes, in which not only those who failed to pay lost their homes, but also those who paid on time or did not have loans!

As for how to break them up? Easy. The Feds sell off the bank pieces or return them to the shareholders that were not involved in any of those activities. When AT&T broke up, its shareholders got pieces of the Baby Bells.
 
strangecircus said:
question becomes is spending hundreds of millions on space the right move to stimulate a economy. The answer appears no, because space and science spending is too slow. Sorry science, I like you but it takes decades to build up scientific acumen and infrastructure.

Speed is key to stimulus. The financial industry and banks are key to a working economy, because banks give loans and loans create business opportunities.

Understood, but see speed above infrastructure and space is very slow, too slow to fix a collapsing economy.
Fair points, & I don't disagree. I'm not sure giving money to bankers who created the problem is the solution. I would agree a guarantee might be good. The best solution I've seen is buying back mortgages (or bailing out the homeowners & not the banks). Would that suit you?

IMO, a guarantee plus a "warning" (plus good regs & enforcement) would inhibit the stupid lending, but also encourage (or maintain) the sensible. Some USG$ to banks which loan to small/medium businesses? Some to banks which are in trouble through no fault of their own? I could live with that.

If the enforcement hadn't been buggered in '06-7, if the rules hadn't been rewritten, the crash would never have happened--& I don't see any reason why it had to: that is, Congress did not (by predestination) decide to allow or facilitate a crash.

Space investment might be slow, but it pays off better in the long run. So does infrastructure--& a depressed period is the best time to invest.
strangecircus said:
I accept your warning about moral hazard.
TY.:)
strangecircus said:
However, this might be the only way capitalism works. Big booms, and big busts, followed by government assistance during the bad times the only question to who.
I'm not convinced. If the government can keep the economy "flatter", steadier, it may grow less quickly, but it won't crash, either. In net, is that worse? Or better? IMO, it's better. (That said, not an economist.:p)
 
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