How to save banks and start trade wars

Does anyone else find the following argument scary?

Canada’s banks are supremely healthy, best in the world even, and if we don’t throw them a massive taxpayer-funded lifeline right now, they’re going to be in serious trouble.

That, in a nutshell, sums up the sentiment being voiced by Finance Minister Jim Flaherty, Canadian bank executives and analysts at the moment. All over the world governments are injecting billions, nay trillions, of dollars to prop up their country’s biggest financial firms. The U.S. is buying $250 billion worth of shares in the likes of Citigroup, J.P. Morgan and Bank of America. Britain is shelling out $65 billion to help Royal Bank of Scotland and Lloyds. France is doing it. Germany is doing it. Even educated Swedes are doing it. The fear now is banks in those countries will be able to borrow funds at lower rates than Canadian banks, and that, in turn, will lead to higher borrowing costs and put Canadian businesses at a competitive disadvantage.

There probably is some truth to that fear. But when the argument for a bailout is no longer about bringing stability to credit markets, and instead is about evening the score with the competition, you’re into dangerous territory. To be fair, Flaherty is far from alone. Countries like Japan and Australia were at first resistant to financial system bailouts but caved so as not to become uncompetitive. Search “bailout” and “competitive disadvantage” in Google News and you’ll get nearly 450 examples of bankers and politicians griping that they need to level the playing field.

This is not just a slippery slope. It’s more akin to standing on Everest and setting off a WMD. How long before a government somewhere extends bailout packages to other industries also hit hard by the global credit crisis, like automakers, steel producers, aircraft manufacturers etc. Other countries will likely respond in kind, lest their industries be put at a competitive disadvantage.

This is how trade wars begin folks.




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How to save banks and start trade wars

  1. Socialism to the rescue? Ironic, that…

    Austin

  2. times are good for the banks? that’s no time to raise taxes and remove our competitive edge!

    times are bad for the banks? that’s no time to raise taxes and remove our competitive edge!

    what’s wrong with this picture?

  3. It’s not socialism when the money goes to capitalist corporations rather than to the people.

  4. “It’s not socialism when the money goes to capitalist corporations rather than to the people.”

    too true

  5. Very true baldygirl.

    Sounds more like a government enforced class system. The bankers, who are thrown billions and billions at the top, and the people, who inevitably will be paying for it all, at the bottom.

    2008 is when the people finally get to see capitalism meeting fascism in plain sight. And we the people are powerless to stop it and most wouldn’t want to anyways.

  6. “It’s not socialism when the money goes to capitalist corporations rather than to the people.”

    Governments and private business working so closely together is more like fascism than socialism. However, it is socialism if government takes stake in our banks because that puts them in charge of our mortgages, savings accounts and the like.

    Corporations aren’t left or right like many seem to think.

    Jason American government has already approved $25 Billion bailout of Detroit 3, they are just hashing out the details at the moment. However, I don’t think a trade war is likely on this issue alone because Americans don’t export many vehicles.

    I do wonder though what kinda nightmares we are in for when there is a Dem Congress and Dem President working together to destroy wealth come January. Pelosi was talking the other day about how another $150 Billion economic recovery plan will be ‘necessary’.

  7. JWL: “Pelosi was talking the other day about how another $150 Billion economic recovery plan will be ‘necessary’”

    And so you feel better, jwl, that President Bush saw her 150 billion and raised it 100 billion?

    And you worry about the nightmare when a democratic President gets in? ??

    I’m not sure I’m sold on Obama so there is a bit of trepidation on my part, but even if he tries I doubt he could exceed Bush in ineptitude. And I don’t think he’ll try.

  8. Hopenow, I like this story. It’s good stuff.
    This buying of shares of private banks by government is just one more step toward socialism. Government intervention cause the Great Depression to last much longer than it would have had they just left the market take care of itself. Socialism doesn’t work did we not learn anything from the failed socialist countries across the world the biggest Example the Soviet Union? This Government is about be handed over to leftist president and a leftest Congress with unlimited power with no checks in place. The Pelosi and Reeds are going to drive this country into the ground. All us out here who work save and take responsibility for our own actions will be crushed under higher taxes, dimished investment returns all in the Greatest Democrat Giveaway that this country has ever seen. The Democrats are at the heart of this economic failure yet the dummies in this counrty are about to give them uncheck power, god save this country..
    ————-
    Muthu

    Business Sales

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