At last, a sensible explanation for the credit crunch crisis

[LittleMyDancingWithTheDevil]

clear as day

Sorry to hijack - I havent looked at the link, but can anyone help me with this?.....

If the govt/taxpayer is now bailing out the banks to the tune of squillions of pounds, and is borrowing and increasing the national debt in order to do so, ..... WHERE is the borrowed bail out money coming from ? It cant be the banks?

I know I am missing something crucial, but just dont get it?

the govt will just be increasing the national debt afaik, which is the fictional amount of money that the govt is in 'overdraft'. none of it is real money anyway!

Now read my link, darn it.

I am both endebted (arent we all) and chastened LMDWTD. I will read immediately.

and also they'll reduce spending on frivolous things like education, the NHS, etc etc....

but remember that Western Govts (US is one of the best examples) are allowed to medium term deficits so can be added to long term national debt.

Much of the money spent on bank shares or bank loans does not create public spending deficit as the govt has an asset to match against expenditure.

Also note that the deficits that the western govts are expecting to run are around 4pc of GDP (up from 2.5pc). So even at these levels these debts are manageable in the longer term.

What I am trying to say is that in the face of this massive global shock, the normal rules of thumb about govt borrowing SHOULD not be applied. All sensible (right and left) govts will borrow more than normal to keep their economies going. Keynes' economic theory was born and proven in the last depression. Essentially he recommended that govts break their normal borrowing rules to keep the economy going. There seems to be a growing consensus that this is the right thing to do in order not to destroy livelihoods and avoid all of the monetary and social costs. No point on govts not saving jobs and ending up paying out dole.

So expect to see planned INFRASTRUCTURE PROJECTS brought forward not deferred. Makes sense for govt to make use of cheap, available labour?