Economy Questions I Can't Answer!

After spending days reading up on how the economy works and why it's going wrong at the moment, I've compiled a list of questions that I just can't figure out. I've been Googling this stuff for days but to no avail.

Anyway, I'm going to post them here in the hope you guys can answer them. Not only will this help me but perhaps other people have asked themselves these same questions and also been unable to find the answer.

1) I keep hearing people say that in the last month trillions have been injected into the economy but it seems like the economy is imploding at a faster rate. If this is the case then why is the Government's plan to inject $700 billion dollars? Surely, if trillions hasn't worked, why would $700 billion?

2) If money has been injected into the economy for the last few months, why did the Government has to pass a bill this time to do it? Couldn't they just carry on doing it without the legislation?

3) The UK has recently created a 'bailout' scheme similar to the USA. What confuses me though is The UK is putting up £500 billion (sterling) which in dollars is almost a trillion dollars. If england is so smaller than America in terms of size, population, GDP etc, why does it need a bigger bailout plan?

3) The US's bailout plan had to go through congress and the senate and included several laws. Why did the UK bailout not go through our Parliament system?

4) I've been reviewing the Yahoo finance link (uk.finance.yahoo.com...) most days and I've noticed that Israel's performance is always up but in the last few days hasn't been active. I'm still learning about what these figures mean so I may be totally missing something obvious here. (Also should point out I'm not insinuating some big Jewish banker conspiracy, I just find it odd that Israel is the only economy doing well constantly).

That's all I've got so far so if anyone could answer any of those that would be great! Also, if you have any questions yourself feel free to post them!

reply to post by scarcitykills


1. The thought process behind the $700B is that it will be used to buy the toxic mortgages that are clogging up various financial firms' books.

2. See above. I believe this sort of operation requires legislature.

3. I thought the UK plan was £50B?

3 (again). Different laws, I would guess? I'm not positive.

4. Israel has been on market holiday, I believe. As to why they're not doing as badly...again, I'm not sure. They may not have the exposure to the toxicity as pretty much everywhere else.

reply to post by anachryon


Thanks for your response but I have some follow up questions.

1) If the Government has been injecting trillions into the economy recently, why didn't they use this money to buy these bad mortgages? Why make leglislation to do something that they've been doing for a while?

3) I thought it was £50b per bank which will total upto £500b

The trillions of dollars pumped to various banks by the Fed is inherently different than the money the bailout plan would give them.

When the fed gives banks money, it is simply giving them 'reserve' money. The bailout plan would actually buy bank debt. Two totally different things.

As for why this required legislation in America, truthfully the monetary portion of it did not. My theory is there's something buried deep in the 400-page bill the banks wanted. I heard something about repealing the reserve ratio requirement of 10:1, not sure if that's it or not.

[edit on 10-10-2008 by k-string]

[edit on 10-10-2008 by k-string]

reply to post by anachryon


It is indeed £500 billion

te legraph article