Monday, 24 November 2008

Getting more debt to solve the problem of debt- mmmmm

Darling announces today that he is going to borrow £118 billion (instead of the projected £38 billion) to keep Britain Ltd. from collapsing next year. Indeed it is quite possible that somebody can borrow money to get themselves through a bad time. However it is also possible for someone to dig themselves deeper and deeper and deeper into a dark hole. Of course, I do not possess a crystal ball so I obviously don't know for certain which scenario we are in- however both these options are possible. In such a dangerous situation it is only sensible and rational to expect the worse case scenario, prepare for it while maintaining hope for the best.


Benno Art Blog said...

Hi Peter,

Here in the States our government is continuing to hand out money to, what seems like, any large institution that someone deemed as "too big to fail".

While none of us actually knows if any of these bail outs and excessive borrowing will end in even more catastrophe, it does seem logical that some (I have my money on the taxpayers) will suffer more than "others".

Today the US bailed out Citigroup with a plan that does not favor those footing the bill. The following was noted in an article on Google:

"But about those details: The deal is complex in its structure, but when all is said and done the government is on the hook for about $249 billion in toxic mortgage-backed assets in exchange for $27 billion in Citi preferred stock."

I know this is new territory, but my instincts tell me that these huge injections of tax money will do more harm than good. Hope I'm wrong on this one.

Peter Alfrey said...

I agree- it is new territory- I think it could well be total market failure. I hope I am not wrong.

I hope it is now proven that unless the environment and human quality of life are valued within economic models, than the system will fail.

'True wealth' is what matters.