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Simon Dixon discusses in this interview, for the upcoming film ‘97% owned’ by queueupolitely, the debate on bailout out the banks or letting them fail.
Monetary Reform and economics with Simon Dixon.
Learn how the Monetary Reform movement has evolved during the financial crisis and why economics may have been the justification behind the financial crisis.
Simon Dixon discusses in this interview on economics and monetary reform
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Bank Bailouts Explained: To Bailout or Not to Bailout?
Bank bailouts have been a contentious issue since the financial crisis of 2008. The idea of using taxpayer money to rescue banks that were considered “too big to fail” sparked widespread debate and criticism. But what exactly is a bank bailout, and when is it necessary?
A bank bailout occurs when a government provides financial assistance to a struggling bank or other financial institution. This assistance can come in the form of loans, guarantees, or direct capital injections. The goal is to prevent the bank from collapsing, which could have a ripple effect on the economy as a whole.
The argument for bank bailouts is that they prevent the spread of financial contagion. If a bank fails, it can lead to a domino effect, as people lose confidence and withdraw their deposits from other banks. This can lead to a broader economic crisis. By rescuing the bank, the government can prevent this chain reaction from occurring.
However, opponents of bank bailouts point to the moral hazard they create. When banks know that they can count on a bailout if they get into trouble, they may take on excessive risk, knowing that the government will come to their rescue if things go wrong. This can lead to a culture of recklessness, where banks prioritize short-term profits over long-term stability.
Additionally, some argue that bank bailouts are unfair to taxpayers. Why should ordinary citizens foot the bill for the mistakes of wealthy bankers and executives?
So when is a bank bailout necessary? There’s no easy answer to this question, as each case is unique. However, experts generally agree that a bailout should only be considered if the bank is systemically important and its failure would have severe consequences for the broader economy. In other words, the bank must be “too big to fail.”
Another important consideration is how the bailout is structured. Bailouts that provide assistance without asking for any concessions from the bank are likely to be viewed as unfair and may incentivize reckless behavior.
Overall, bank bailouts are a complex issue that requires careful consideration. While they can prevent an economic crisis, they also create moral hazard and may be viewed as a form of corporate welfare. To bailout or not to bailout? That’s a question that policymakers must answer on a case-by-case basis, taking into account the unique circumstances of each situation.
My use of "much" is intentionally 😉
The only real problem although more as a secondary consequence of this drastic measure´d be the annihilation of the primary lenders hence the break down of the bond markets.
So albeit i´m not concearned with money creation itself i´m aware the refinacing capacities´d collapse and because of this it´ll not be allowed no matter how much tax bucks´re sucked into the zombie banks.
Kind of a crux isn´t it?
I´m a stubborn supporter for bank insolvency.
1st it wouldn´t vanquish all banks
2nd it´d cleanse the banking system now instead of perpetuating fraud on a massive scale (and i´m not intending to term interest a "fraud") what i mean is more like "Magnetar" and the like.
How do you want to create money without banks?
The banking system only matters if money still exists and matters as a means of doing business. IF we had an actual value for value trade the whole money aspects goes out the window. Money by itself has no real value. If people stopped using money, the whole system collapses, regardless of how much much money there actually is. Eliminate the need for money and we eliminate so many problems in the world. Hey rich guy, I don't want your loan. I want something tangible. Like shelter.
@bankingreform
There are NO " too big to fails"…. it was a HUGE mistake .
These bankers have known all along what they were doing.They have received bonuses for this "unforseen" crash. who gets bonuses for screwing up?…they do!
wrong.
The bank bailouts were fraud. Banks like GS with over 40 to 1 leverage & $150B in level 3 off-balance-sheet assets, even after Sarb-Ox. JPM tried to buy Wamu for years, then ran out $16B in 10 days to get FDIC to hand em over for free, with US eating bulk of bad loans. Tried same with Wachovia to save Citi, but WFC & Buffett stole it for $9B. 1000s of banks seized in 90s S&L, no bailouts. Bank-run FED, politicians & bad laws, greed, & fraud is US banking circle of life. Bush=Rs=Obama=Ds=FED=Bank
Great explanation Simon, very easy to understand. Keep up the good work! I can't imagine how significant the money supply fall would look when you factor in the fractional reserve lending system if you let the bad banks fail. It does seem like a choice from a huge depression (letting banks fail) or a continuation in the current system of monetary slavery by devaluing the dollar. Even with rolling out new honest banks, you are still fighting a devaluation of the dollar from the bad banks.