UK GDP declining nearly at Great Depression rates

[SamuelRSmith]

NJ5 said:

SamuelRSmith said:

The issue with the UK, though, is that the banks are so large and important that if they failed, they'd drag other banks down with them. There's a lot of inter-bank lending that goes on, and one of the problems was that banks weren't keen on doing this anymore (because they were worried about the other banks failing and thus not being able to pay the money back).

Letting a bank like Llloyds or Barclays fail could lead to the entire system failing.

I realize that the banking system is a big mess... but just injecting money into every failing institution doesn't solve any problem. What would solve problems would be to force banks to reveal their toxic assets, and do whatever's needed to erase them. Yeah, lots of loan defaults would have a fast and bad impact on the economy, but at least the problem would be mostly gone immediately.

The problem now is that we simply don't know what atomic bombs are waiting to explode inside the banking system. Exactly the same situation as last year before the USA banking collapse.

 

Injecting money into the banking system is working, though. Banks are lending more, now. They're profitable, and some banks have started paying their bailouts back (read: Northern Rock).