Further investment in British Banks

[olddutch]

H.M. Treasury today becomes perhaps the biggest hedge fund in the UK: it is investing £25.5bn in Royal Bank of Scotland shares and £5.7bn in Lloyds shares, financed almost exclusively by borrowing.

Coming on top of all the previous multi billion £ support, is it really probably quite good business ?

[rov1200]

I think the government are playing monopply with taxpayers money to support the banks. We now own many of them as a major shareholder. When they pass GO they invest yet more £bns in the banks.

The problem is come a second double dip recession and there is a stock market run on the banks our holdings will either be useless or reduced in value.

Labour would now like to sell them but no one wants to buy and we may have to offer them as job lots and cut our losses. This debt will hang around our necks for ever as somehow the loss will have to be made up.

With all the talk of saving the banks the rest of our economy is neglected which is why other countries have pulled out of recession but our eyes are not on the ball in the real world.

[birdie1971]

Where's all this money being borrowed from?

As I understand it, every country in the world is suffering from the recession to a greater or lesser degree than the UK. So who exactly are the Government borrowing money from?

The concept of money has always been a pretty abstract notion at the best of times but in the past, hard cash was backed up pound for pound by gold reserves. This simply cannot be the case any more. There's not enough gold in existence to shore up the amount of money currently in circulation.

The only logical conclusion is that the money is literally virtual. It simply cannot exist in any real sense.

If the money being borrowed is simultaneously real and imaginary at the same time, are we living in some sort of virtual economic bubble that is about to burst?

Should we start buying tinned food and getting ready for 21 December 2012?

[New Judge]

The amusing thing I find about all of this is that whenever government spends money it speaks of “investment”. Most of government spending (and this is a prime example) is no more an investment than if I were to stand in the rain tearing up £50 notes. Despite their assurances to the contrary this money will never be regained by the taxpayer.

As to where the money is coming from – it is simply being printed. Of course there is the disguise of “gilts” and “government backed bonds” but effectively all this government is doing, having run out of the real stuff, is printing funny money (aka “quantitative easing”).

Everybody knows what happens when the supply of something becomes more plentiful – it simply becomes a less valuable commodity. And so it is with money. This government has recently injected £175bn into the economy, plans to do more of the same, and every one of those phoney pounds devalues the currency. The cost of this devaluation (in the form of inflation and a weaker pound) will be paid for years to come, long after the current bunch (and probably the next bunch too) of charlatans has shuffled off to newly created jobs in the ever-expanding EU monster.

Yes, there was a “global” financial crisis last year (as Brown continually tells us). But the UK ran out of real money long before that happened due to profligacy and the illusion of “growth” (funded by funny money) and we will not recover as readily as other nations.

[rov1200]

""Everybody knows what happens when the supply of something becomes more plentiful – it simply becomes a less valuable commodity""

I agree with that New Judge. Our currency has been devalued against the major currencies which is very noticeable if you buy foreign goods. Have you noticed the price of laptops have gone up 25% recently.