can that really be true ?

Either Govt is simply Printing more money, thereby devaluing existing money. IE Inflation.

Or it is Saddling us with Bad Debts, which we have to pay back which itself is inflationary.

Govt has a choice of Protecting the People or the Banks, why not simply say to the Banks, you got us into this mess.
I am going to declare that as of today, all mortgage Debt is forgiven and the People can keep their homes.

The Banks wont like it of course but Other Banks will take their place.

Who should Govt protect, the Banks or the People.

Since they have only lent us worthless fiat money or thin air credit any way, they have lost nothing anyway.

PS.

given that a £50 note costs around 1p to print why did Brown swap a large pile of Gold Bullion for a large Pile of unbacked, essentially worthless fiat money.

It seems the problem is much much bigger than I imagined. It appears that there is a “ten trillion dollar opportunity” out there for anyone who has any cash to spare. Some of the text in this link is nearly understandable.

http://www.highyieldblog.com/

There has been a rally in the market today, some are saying it is because of the wise move on the part of that financial genius Gordon Brown.

Well, how about this to give you nightmares?

Shorts are getting out of their positions for fear of legal sanction. That seems to me to mean they now have to buy stock to cover their short position, hence the rally. They may well have lost money – because they have had to unwind their positions premeturely. OK so what you say, shorts are evil.

So now shorting is illegal. Next week, perhaps next month, when the reality of the financial stocks dawns, the drift downwards will start and gather momentum. You know what – there will be no short covering rally. No one will be buying stock to cover their short positions, everyone will be scrambling to sell.

Imagine a boat in rough seas with the passengers and crew standing on one side.

Effectively, our financial ‘genius’ Gordon Brown has removed the mechanism in the market that would normally have stopped a plunge to the bottom.

Personally, I think he is insane.

A few years ago I had a part time job in the banking sector, taking applications for credit cards and performing balance transfers on activation calls. This was in early 2004 and it struck me then just how much debt was out there and how unlikely it was that it could all ever be repaid.

I’ve also worked in the public sector and done some work on debt advice. People with no income would regularly be seeking help with many thousands of pounds debts they had accumulated. It always struck me through the boom years that the banks must have been overvaluing this mountain of debt, and that the housing market was going bananas.

I didn’t have the faintest clue what would happen though. Before the financial press started discussing the state of the US property market on the run up the first front-page shock of the credit crunch last year I didn’t even know what the LIBOR was, let alone a MBS, a CDO, and SUV, a CDS, a CFD or the rest of it.

As a direct upshot of all this I’ve started reading the financial news, bought books on the subject and even dipped my toe in the water, made a few small derivatives bets and had my fingers burned just enough to teach me a thing or two about different ways of managing my money and risk.

So in a way I think the credit crunch is not only an inevitable thing, but also a cloud with a silver lining.

Myself, I cannot see how things can improve. If the city is just shuffling worthless pieces of paper – along with some serious transactions – and nobody has the faintest clue what they are doing, how can they?

And, by the way, isn’t the whole idea of a hedge fund to escape regulation by the City? I wonder who is checking up on them? You need a greyhound to catch a hare.

With central banks issuing all this new paper, what is going to happen to the money supply? Will this not chase up global inflation? Will the Banks be required to have much higher fractional reserves in their vaults and in their accounts at the BoE?

Meanwhile I will try and understand what an “exchange traded fund” (ETF) is; these apparently will takeover the job while the “short sellers” are in the sin bin.

Redwood for Chancellor OK.

reply: It is unlikely to be inflationary, because the government money is being issued to try to make up for the collapse of private credit

I think it’s a bit optimistic that taxpayers will profit, even in the very long term, on the mortgage backed securities it ends up with. Any mortgages originated and securitised over the past three years must already be substantially underwater, assuming average loan-to-value ratios.

I can’t really understand why mortgage backed securities can’t be carefully unpicked and credibly marked to market. Although, this assumes they are still the predominant problem, as claimed, and the contagion hasn’t in fact spread substantially to other areas of banking activity.

http://www.johnredwoodsdiary.com/2007/08/31/freedom-of-movement-of-money/

I’m all for competition generally, however in the field of financial services, perhaps a few mega banks will provide a more stable environment, so I’m not too horrified by the idea of the HBOS-Lloyds deal. The last week has taught us how easily confidence can be eroded and how quickly life in the city can impact on Joe Public. We all know the ban on short-selling won’t last and although I’ve long seen this practice as parasitic, it certainly isn’t the root cause in this latest crisis of capitalism. Perhaps the answers lie in the fact that there are too many lenders, too many vessels that can fail? Perhaps we need an era of mega banks to provide the fundamentals and the security needed for a reliable lending environment?