http://www.cnn.com/2009/POLITICS/01/26/stiglitz.finance.crisis/index.html I have been thinking along these lines for over 2 years now. Thank goodness someone with skill in the language put it all down on paper so elequently. Give it a read. One of the best reads you'll find.
eh. The Sweden plan has been talked about for months. I think it will fail in other areas 1) This is not a banking problem in one country it is worldwide. 2) The government, (its already there but still) will end up nationalizing 60% of banks to implement this plan, and killing the few decent private banks. If you are a private small bank during tough times, can you survive competing head to head with the government? 3) Nationalizing the bad banks doesn't fix the main problem, which the article fails to mention. THERE IS NO ONE TO LEND TOO. Yes there are people with great credit ratings out there, but if they lose their jobs tomorrow, having a 750 FICA means crap, when you have no income. In the end, this is one giant myth and amazing how many ivy league economists can't get their heads around the concept. Taking $1.00 out of my pocket to pay $.50 to Peter for his stupidity so he can loan me $.25 with interest. Is no way to get out a crises. Every breath government breathes, is one less breath for you and me.
True. I thought that it would have made more sense just to use the bailout to make loans directly where they, rather than give it to banks. Give the banks $350 billion so they can loan out $150 billion and sit on the rest? How does that help? I just got the feeling that govt thought they had to do SOMETHING, even though there was no proof it would help. And I think the deficits we are racking up are making it much worse short and longterm. Imagine if federal govt were NOT allowed to do deficit spending. Imagine if we didn't have a $10 trillion deficit? Imagine if we did not have huge SS & Medicare deficits? Imagine!!!
I'm really interested by the mention that if the banks were owned by the government, you could net all the derivatives outstanding and eliminate a lot of them, lowering the risk.
the banks thought they could do whatever they want with banking deregulation. FED was created to regulate banks but they failed to regulate. in order to be bank and have previlleges of bank, you need deposits from customers. the entire financial system is in jeopardy if anyone can lend money they don't have. cash is not just a piece of paper but a receip of goods and services. when banks lend money they don't have or gov't print money they don't have , they are maknig counterfeit money. there is limited capital or cash. the banks has more bad loans they they have cash. so when depositors withdraw money, they don't have cash to give the customers. 25:1. they were lending $25 for every $1 customer deposit. they assumed only max. 3% default so if 10% default the bank is insolvent.
banking is a business. they have to compete for depositors and find borrowers to lend money. banks were making risky loans and thought the insurance company would insure their loans. ell the insurance went bankrupt and the bank owned the insurance company insuring their own bonds.
This guy is just like all the rest of the so called bright ideas to save this mess, they focus on the bank directly. The banks are in trouble because why?? The CONSUMER cannot pay the current terms! Duh! How come all these Nobel economic geniuses cannot seem the grasp the idea of attacking the problem at its core. Help the CONSUMER to pay back the banks, thus stopping the bleeding of assets etc etc. I posted a very elementary plan that I think would be far more productive than anything they have designed thusfar. Here is the plan- http://www.elitetrader.com/vb/showthread.php?s=&threadid=151362