An article in The Independent analyses the possible consequences of the government bailout of the banks. The overall figure appears to be around £1 trillion , nearly equal to our annual GDP. Will this solve the problems of the banking sector or will they merely be transferred to the state? The amount imvolved will have a big impact on the National Debt which will beome a burden if it is unsustainable. Remember what we mean by 'Government Failure' - where intervention leads to a loss of economic welfare rather than a gain. Is this an example of the costs of intervention exceeding the benefits?Thursday, 22 January 2009
Bailing out the banks - possible 'Government Failure'?
An article in The Independent analyses the possible consequences of the government bailout of the banks. The overall figure appears to be around £1 trillion , nearly equal to our annual GDP. Will this solve the problems of the banking sector or will they merely be transferred to the state? The amount imvolved will have a big impact on the National Debt which will beome a burden if it is unsustainable. Remember what we mean by 'Government Failure' - where intervention leads to a loss of economic welfare rather than a gain. Is this an example of the costs of intervention exceeding the benefits?
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If they bail the banks out, does that not mean that taxes will increase to cover the debt? Increasing taxes at a time like this isn't a wise move for the government right?..because surely that will decrease consumer spending even more..
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