why buy gold doesn't help a bank, page-5

To those who see it like Skol and Timbers

I probably AM an economic simpleton. I certainly don't profess to have any detailed understanding of the various institutions which aid a modern economy to function. However, I can't see the benefits for a society which allows banks and other financial institutions special priveleges simply because they're in a position to hold a gun at the heads of other citizens ... Bail me out, or else!

It seems your assertion is that, if banks were permitted to fail, then great suffering would come to depositors, investors, and to many others less directly involved - altogether, no doubt, a very large proportion of today's society. And, plainly, everyone would be hurt to varying degrees by the resultant slowing of the economy.

Therefore, many say, it cannot be allowed to happen.
Despite all this, I cannot agree with your point of view. If the banks fail, then certainly the people in the groups mentioned above will be hurt, but the balance of the society shares none of the responsibility for this calamity and does not deserve to shoulder part of the burden for those who were responsible for, or caught up in it all. If only those vulnerable groups were affected, the fallout would be somewhat contained and there’d be less of a drag on any subsequent recovery.

What would the result look like in this case? I think that those institutions which went under would have to sell out to other interests for pennies on the dollar, and these latter interests would then, having bought them for sensible price, be in a position to regrow them on a sounder footing.Those who have failed would have to humble themselves and begin again at the bottom; likewise, perhaps, for the many who did not do their due diligence well enough in the first place, or who were simply unlucky (e.g., depositors and those unfortunate enough to be indirectly afflicted by someone else's failure … Fortune is not necessarily fair, but that is the way of the world).

If people and institutions were always made to be responsible for their own outcomes, the economic mistakes and crimes which led up to recent conditions would have been nipped in the bud many years, perhaps decades ago and would never have become so devastating. If they’d been stopped in the early stages, vastly smaller numbers of people would have suffered and any slowdown of the economy would have been quickly reversed. As it is, I think we are in the early stages of a very long period of little growth because everyone has had their wings clipped - not just the few. Well, that is how I see it anyway. But maybe I'm just naive.

Tez