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andrewb · 28-01-2009, 15:57

There used to be a balance between how much a bank had in its coffers, and how much it was lending. It would not lend more than it had. Sounds like common sense right? Over the last decade however, the gap between what they have, and what they're lending, grew from practically nothing, to £700 billion. Now we have a situation where the banks won't lend to each other, because they have no idea how much 'bad debt', each other has, so they won't risk losing their money.

Once the banks stop lending to each other, and business, and people, it causes a huge amount of problems. Business works on credit, if they can't get credit, even profitable businesses can go to the wall, leaving vast amounts of unemployment.

The government think that by injecting, huge amounts to the banks, it will kick start them into lending again. The trouble is, will this work, or will it simply increase our government, public, countries, debt to sky rocketing heights?

28-01-2009, 15:57	#2
andrewb God Member Join Date: Mar 2004 Location: Accrington Posts: 3,905 Liked: 1 times Rep Power: 920	Re: Bailing Out Banks There used to be a balance between how much a bank had in its coffers, and how much it was lending. It would not lend more than it had. Sounds like common sense right? Over the last decade however, the gap between what they have, and what they're lending, grew from practically nothing, to £700 billion. Now we have a situation where the banks won't lend to each other, because they have no idea how much 'bad debt', each other has, so they won't risk losing their money. Once the banks stop lending to each other, and business, and people, it causes a huge amount of problems. Business works on credit, if they can't get credit, even profitable businesses can go to the wall, leaving vast amounts of unemployment. The government think that by injecting, huge amounts to the banks, it will kick start them into lending again. The trouble is, will this work, or will it simply increase our government, public, countries, debt to sky rocketing heights? __________________ formerly cyfr Last edited by andrewb; 28-01-2009 at 15:59.