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re: bad bank lending at the root

Posted by jj on August 24, 2011 at 08:14:05:

In Reply to: re: bad bank lending at the root posted by NW on August 23, 2011 at 17:07:17:

We would have a smaller deficit, but still a deficit if the banks had been kept under control (remember though outside banks suffered large losses also, and the powers of the Central Bank to regulate them effectively was limited - you can borrow from a UK bank to spend in Ireland).

However, your comment that most of your taxes (or tax increases) is due to repay bad lending is frankly false. The interest bill as a % of tax revenue was as low as 4%, and likely to grow to 20% over the next couple of years (but in 1991 it was over 25%). I accept that this is just the interest bill, not repayment but repayment is unlikely until some growth returns (and even then unlikely to be much, it will just be a case of the denominator increasing that will improve the statistics.

No argument that the banking crisis has been damaging to the economy and state finances. No argument there at all. But the point I was making is we have to be careful not to blame all of current woes on this. There is other factors - smaller maybe, but the problem is we haven't rectified them.

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