Economists

[Robby nz]

OK you all who seem to know everything help me out here.

With all the bail-outs and money being thrown at banks and companies world wide the theory seem to be that if the banks have more money they can lend it to the people who can then go out and buy stuff they dont really need, this will keep the companies who make this stuff in business and they in turn can borrow more money to produce more. Then interest rates have been dropped to help the borrowers .

So everyone gets into deeper debt, but hang a bit , isnt it debt that has caused this mess? how then is more debt going to get us out of it?

Interest rates have been dropped by Governments and the banks have dropped the interest rate they pay the prudent savers, not long ago I used to get over 7% on an on line call account now I get just over 3%. But have they dropped the rates borrowers must pay, well not on credit cards they are still up around 20% and on housing and other loans, well a little possibly 1 or 2 % so where is the difference going? bonuses yes we have read about them and profits of course.

So you who know all tell me how the world is going to get out of this.

[lannarebirth]

OK you all who seem to know everything help me out here.

With all the bail-outs and money being thrown at banks and companies world wide the theory seem to be that if the banks have more money they can lend it to the people who can then go out and buy stuff they dont really need, this will keep the companies who make this stuff in business and they in turn can borrow more money to produce more. Then interest rates have been dropped to help the borrowers .

So everyone gets into deeper debt, but hang a bit , isnt it debt that has caused this mess? how then is more debt going to get us out of it?

Interest rates have been dropped by Governments and the banks have dropped the interest rate they pay the prudent savers, not long ago I used to get over 7% on an on line call account now I get just over 3%. But have they dropped the rates borrowers must pay, well not on credit cards they are still up around 20% and on housing and other loans, well a little possibly 1 or 2 % so where is the difference going? bonuses yes we have read about them and profits of course.

So you who know all tell me how the world is going to get out of this.

The govt. isn't bailing out banks so they'll lend money to people, they are bailing them out because those banks are insolvent. They couldn't possibly lend money as they are beneath federally mandated reserve requirements. If they bail them out enough to exceed lending margins, I doubt the banks will be in any hurry to lend money to anyone without sterling credit, or until economic conditions improve significantly.

[sanmiguel]

The banks arent going to lend until this crash hits the bottom.

And the bottom is going to last a long long time with the upcoming tax tsunami Europe and the US have coming.

It seems Gordon Brown has failed in getting the banks lending huge sums to us to reinflate the burst housing bubble, though his messy plan does seem to have prolonged the much needed housing crash, IMO once property hits rock bottom in 2-4 yrs then things may start to look up.

[Carmine6]

The banks aren't necessarily the problem. US Bank lending has actually gone higher in 2008 and even this year. But the amount of shadow lending like commercial paper is way down. So there's a few things going on.

1) Real, new borrowing - growing businesses and consumers who are doing well

2) Drawing of credit lines just in case - drawing pre-existing lines and then sitting on the cash

3) Replacement borrowing - using credit lines to replace other borrowing sources like short term commercial paper

4) Debt financed survival

Unfortunately there's too much of 2 and 3 going on. Those aren't supporting growth. Well too much of 4 also, but no surprise there.

Commercial loans:

http://research.stlouisfed.org/fred2/fredg...type=line&s[1][id]=BUSLOANS&s[1][range]=5yrs

Consumer Loans:

http://research.stlouisfed.org/fred2/fredg...type=line&s[1][id]=CONSUMER&s[1][range]=5yrs

Commercial Paper Issuance (Average Millions of dollars per day)

http://www.federalreserve.gov/releases/CP/...tats.htm#MKTMKT

[trogers]

People who are insolvent will remain insolvent due to junk credit rating. Excess money circulating will not reach them in the form of credit. They have to knock sense into their head, work their butts off and start having more income than expenditure to discharge their liabilities.

Don't tell me there is no job available. There is only no preferred jobs.