Sub-prime Bail Out

[DanaC]

*nods* okay. I agree.

I've just watched an interesting report on Newsnight (finished about five minutes ago). We are having our own 'credit crunch' at the moment. Northern Rock was the first of our major mortgage lenders to go into serious and newsworthy crisis. Lloyd's Bank was in talks to offer them a hand, the Treasury and Bank of England both intervened to prevent this. Many companies are currently paying out more in interest than they can afford, so with a credit crunch we'll see joblosses and closures, and house prices are going to fall.

Traditional economic sense says you don't intervene to help individual banks or people. But, there are also economists arguing that this only makes sense if dealing with a local problem. The credit crunch being international can, if allowed to continue without those confidence raising measures at a local level, throw the whole economy into serious recession. The argument seems to be that the dangers to the economy of not intervening are significantly more dangerous than the dangers of not.