The Banks Are Dead.!

[Ferret Oxide]

@Pratty. That's one hell of a gamble!

As an aside, if the banks had been allowed to collapse (bearing in mind we're talking about RBS, Natwest, Halifax and Bank of Scotland) the following would have happend:

1. The banks call in administratorsv -vthe administration process can take months, by the way.
2. All bank accounts held at one of these accounts are frozen. Millions of people cannot access their money.
3. Any payment passing through one of these banks is frozen while the administrators do their thing.
4. Thousands of bank emplyees are made unemployed.
5. Companies trying to pay wages to their employees find that they can't.
6. Businesses that rely on credit and bank with these banks can't get any. Suddenly they can't pay their staff or purchase supplies or stock.
7. Retailers are hit as lots of people stop spending because they can't access their money.
8. Credit cards run by subsidiaries of the effected banks may also be frozen.

We had a taste of some of these things on a small scale with the Natwest fiasco. Now imagine that going on longer, with no promise of being reimbursed, no certainty that people could ever access the money on their accounts. Still think it would have been better to let the banks fail?

Incidentally, the government did have a scheme in place where they insured deposits with a bank up to a certain value. So they could have (eventually) paid out to all account holders. The cost of doing this would have been much higher than the bailout was, though.

[The Angry Jock]

Incidentally, the government did have a scheme in place where they insured deposits with a bank up to a certain value. So they could have (eventually) paid out to all account holders. The cost of doing this would have been much higher than the bailout was, though.

£85,000 per bank account, and it's still in place.

[pratty]

@Pratty. That's one hell of a gamble!

As an aside, if the banks had been allowed to collapse (bearing in mind we're talking about RBS, Natwest, Halifax and Bank of Scotland) the following would have happend:

1. The banks call in administratorsv -vthe administration process can take months, by the way.
2. All bank accounts held at one of these accounts are frozen. Millions of people cannot access their money.
3. Any payment passing through one of these banks is frozen while the administrators do their thing.
4. Thousands of bank emplyees are made unemployed.
5. Companies trying to pay wages to their employees find that they can't.
6. Businesses that rely on credit and bank with these banks can't get any. Suddenly they can't pay their staff or purchase supplies or stock.
7. Retailers are hit as lots of people stop spending because they can't access their money.
8. Credit cards run by subsidiaries of the effected banks may also be frozen.

We had a taste of some of these things on a small scale with the Natwest fiasco. Now imagine that going on longer, with no promise of being reimbursed, no certainty that people could ever access the money on their accounts. Still think it would have been better to let the banks fail?

Incidentally, the government did have a scheme in place where they insured deposits with a bank up to a certain value. So they could have (eventually) paid out to all account holders. The cost of doing this would have been much higher than the bailout was, though.

But wouldn't they not need bailing out if they managed themselves properly?

[Ferret Oxide]

Oh, that's absolutely true.

I'm only arguing with your suggestions because they would do more harm than good. I'm not defending what the banks did, simply trying to explain that they are only a part of the problem.

[pratty]

In my minds eye I see Cuba (or communist Russia) as an example of what Pratty's talking about, a completely enclosed country where the newest car is 40 years old.

Just to be clear I'm not a socialist, I'm just desperately trying to think of alternatives. While my scenario may have had socialist hallmarks, it could be possible to continue a tightly regulated and transparent private banking sector. My idea stemmed from the fact that we currently pay the banks the cost of borrowing our future money. I was just trying to work out a cheaper way to do it. Especially for mortgages, perhaps the only loan that could be considered "necessary". Private loans could still take care of unnecessary borrowing.

As I've said I'm sure smarter people would do a better job than me, but where are they, what alternatives have they come up with? I'm sure they are some out there so why aren't they on the table for discussion? I've never heard on the news that completely new economic models are being considered. It's been 4-5 years since the recent economic crash and it was predicted years before that.

[pratty]

Oh, that's absolutely true.

I'm only arguing with your suggestions because they would do more harm than good. I'm not defending what the banks did, simply trying to explain that they are only a part of the problem.

That's what I'm saying was saying too , except from the other side, saying the borrowers are only part of the problem and the banks have to be included in the blame too, as well as government and everyone else that has contributed to this mess.

[SexyWayne]

There is really only 1 person to blame for the current crisis, and that unfortunately is ourselves. We as a society may blame the banks and their systems, or indeed the "rich" but it has actually come down to the greedy consumer driven society the west has developed.

Well I can happily say that I'm not to blame then, I've never had any type of credit, I can't get credit.. and to be honest I don't want or need credit, everything I own I've worked and saved for.. and best of all.. I can sleep at night, I don't know how people with tens of thousands worth of debt manage (not including mortgages of course).. I worry if I'm a couple of weeks late paying a £30 electric bill

[joefish]

What about ISA's? Or tax relief on pension payments, or even salary sacrifice into your pension (which can actually mean you can claim benefits whilst sacrificing a £50k salary into your pension), you don't need an accountant for that.

What about them? How much do you think they're really saving you?
To have the income to save in an ISA you first have to be earning more than you're spending every week/month so you have some spare to put into it. Second, you've already paid income tax on what you've earned before you even have the cash to put in an ISA. You don't get any of that back. The only thing it saves you is on the pitifully small interest you earn on your savings, you don't pay tax on that small amount of extra income. The difference between an ISA and an ordinary savings account is of the order of tens of pounds over the course of a year, for every year you've been filling up your ISAs.
As for pensions, again, you're not avoiding tax. You either get taxed now on the cash as income, or you get taxed when you take it out later as pension. The fact that you're only paying tax on it once instead of twice is hardly avoidance.

You're focusing on extreme tax avoidance.

No, I'm talking about avoiding income tax and capital gains tax, which are particularly significant when you're taking home a large income or making significant capital gains through trading and investment. What you're talking about is avoiding secondary taxes, which are frankly trivial amounts compared to the basic tax you still end up paying.

[The Angry Jock]

What about them? How much do you think they're really saving you?
To have the income to save in an ISA you first have to be earning more than you're spending every week/month so you have some spare to put into it. Second, you've already paid income tax on what you've earned before you even have the cash to put in an ISA. You don't get any of that back. The only thing it saves you is on the pitifully small interest you earn on your savings, you don't pay tax on that small amount of extra income.

It still saves you from paying tax on saving though doesn't it? The tax may not be that pitiful after a period of time. As I asked, when does tax avoidance become unacceptable?

With pensions, is the lump sum you get not tax free? Plus, would you not be paying a reduced rate of tax as retirement income will be less than working income, then you've got the tax threshold to consider? But then that tax income is deferred for upto 52 years!

Also, I forgot to mention childcare vouchers, you don't pay tax with them and you don't pay at a later date either.

You're focusing on extreme tax avoidance.

No, I'm talking about avoiding income tax and capital gains tax, which are particularly significant when you're taking home a large income or making significant capital gains through trading and investment. What you're talking about is avoiding secondary taxes, which are frankly trivial amounts compared to the basic tax you still end up paying.

We're talking about tax avoidance, if you want to pick and choose specific areas of tax avoidance then you need to be clear about that. Tax avoidance is tax avoidance, regardless of what level of tax you're talking about. So yes, you are talking about extreme tax avoidance because you only want to talk about millionaires...

"trivial amounts" - that's an interesting point. You need to think about scale, if everyone is avoiding a measily couple of quid every month here and there, we're talking about sums of money into the hundreds of millions (or even billions) annually. Personally, with ISA's and Childcare Vouchers I'm avoiding around £500/year, with pension maybe £800/year...and I'm just some shmuck who makes less than national average salary.