[oldgradstudent]

This is crazy talk.

Are you too young to have been here during the 2008 crisis?

Almost the entire financial system was illiquid and insolvent, and would have collapsed without massive and unprecedented government intervention.

And in all cases, management knew, or should have known they were lending money that would never be returned.

For example, the reason "liar loans" were called that, was because the financial institution issuing the loans refused to check reported income even if the information was available. The name "liar loans" was common in the financial industry BEFORE the crash.

[setum]

> would have collapsed without massive and unprecedented government intervention

would have, could have, but didn’t, that goes only to prove op’s point that institutions don’t lose money, especially the big ones.

[MomoXenosaga]

The government is an institution and they lost money. Entire banks were nationalised in a single night.

[croes]

Banks mean nothing. They shiftet their assets to other banks and nationalized mainly the debt. As a consequences they cut pensions, cut benefits and raised taxes on the middle class. The top 1% was spared and saved and got even richer in the crisis.

[croes]

That's my point. The system was saved but the people down below had to pay. They lost their houses and jobs, most managers didn't even lose their bonuses. The crisis made the rich richer and the poor and middle class poorer. And now they still behave the same and the next bubble is sure.

[inter_netuser]

It's still an open question if government intervention in 2008 was helpful or harmful.

History will be the judge of that, far too early to tell.

Several countries did not bail out their banks, and simply took them into recievership. Outcomes weren't much different.

[AnimalMuppet]

No, I don't think it's much of an open question.

We have seen historically what happens in that kind of situation. That didn't happen in 2008. Also in 2008, we had an unprecedented government intervention. Now, you can claim that "this time would have been different", but the burden of proof is on you for that claim. Without that proof, the observations are "it didn't crash when it usually did, and the government intervention is what was different". Not quite proof, but very suggestive.

You observe that some countries did not bail out their banks. But which countries? The US and big European banks are systemically important worldwide in a way that the banks of, say, Croatia or Egypt are not. (Not saying those are the countries you have in mind - I don't know which ones you're talking about.) If country X didn't have a real estate boom, and let some banks go under without bailout, it shouldn't have caused much damage.

[inter_netuser]

To disprove a hypothesis only a single counter-example needed.

The example is Iceland. It let its banks fail, wrote down nearly 15% of household debt, let its currency collapse, put capital controls in place. Completely opposite of the west did, everything exactly opposite of what global banking cartel insisted on.

Guess what? They recovered way quicker. If you contrast it to another smaller country that was also hit pretty bad, Ireland, who followed the more common bailouts+austerity, Iceland recovered years ahead of Ireland.

Yes, Iceland is a small country. The bank debt however was quite ridiculous: 20x larger than the GDP of the entire country (lol), and threatened failures of European banks, as most borrowers were foreign. The UK and Dutch governments had to compensate their residents. It was an issue systemic enough to create a diplomatic row and even attempts to kick out Iceland out of the free trade block.

There are plenty of historical examples that contradict the "zomg bailout or else the world ends" FUD.

In the Asian Tiger crisis of 1997, economies with capital controls and managed exchanged rates (Singapore, Taiwan, China, Vietnam) fared much better than relatively more open economies that implemented IMF demands(South Korea, Phillipines, Malaysia, Indonesia), despite of the incessant FUD and pressure from the West at the time.

Even in the case of Great Depression in 1930s, a rather mainstream opinion of the monetarist school of thought today is that the intervention by the Fed was either the cause, or made things much worse. No, it's not some fringe crackpot theorists, but an orthodox mainstream opinion. Nearly 100 years later it is not firmly settled still.

Bankers have perverse moral incentives to convince you that handing over your hard earned tax dollars to them is somehow good for you. Of course they'd say that.

Evicted taxpayers' money going to bailout rich fund managers that made bad bets is the hypocrisy of systemic proportions indeed.

[croes]

It did happen 2008, but not to the US and the rich european countries. They successfully outsourced their banking faults and saved their banks. Just look what they did to Greece. The rating of the US is a joke but they control the rating agencies.