Monday, Mar 24, 2008
Why the Banks Should be Allowed to Fail?
Mises Blog: Central Banks to Buy Junk Mortgages...or Not
Interesting commentary on the bad debt problem. Not as easy reading as the mainstream media but well worth a look: "If the banks that holding (sic) paper assets goes bankrupt, society as a whole has no fewer productive factors. Only the ownership of these assets changes. How could this lead to destructive macro-economic effects?"
Posted by quiet guy @ 12:26 AM (392 views) Add Comment
5 Comments
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1. japanese uncle said...
Ultimate solution to root out banking credit crisis should be to raise the capital requirements up to say 50% (which should of course be a gradual process say in 10 years), while strictly banning SIVs and other phoney 'off-balance' instruments, as well as 'bonuses' which just encouraging cowboy mentality among banking executives at the cost of the long term stability. Any offender against this basic rules must be sent to Guantanamo Bay as potential financial terrorists and subject to the 'tickling torture' to death.
2. planning4acrash said...
I have a better solution. They can be forced to live in council flats and have their wages limited to benefits levels. No more i-pods, no more fast cars, let em take the bus and have holidays in Scarborough. Put working class people who actually work in the real economy in their posh city flats, through key worker schemes when prices have fallen. Anarchy, ok?!
3. Icarus said...
Banks should be allowed to fail because the evidence so far suggests that banks that are given access to cheap money by Central Banks are using that money to turn a profit by buying higher-yielding assets and doing nothing that stimulates the economy. US banks use cheap Fed money to buy higher-yielding euro-denominated bonds. In the process they make a currency gain and add to US inflation.
The best solution to the banker problem is to use the same principles and methods employed in the seizure of assets gained through crime. Banks will always act irresponsibly on the upswing because the individuals running the banks know that they can get out after a few years with several tens of £ millions and leave the bank to pick up the pieces (thus 'moral hazard' is irrelevant). Confiscate the assets of such people.
4. harold said...
I have an even better solution: no fractional banking; 100% sold/silver standard. I.e., no wealth extraction via expansion and contraction of the fiat system.
5. drewster said...
I agree with Harold.
Interesting quote from the article: "If the banks that holding paper assets goes bankrupt, society as a whole has no fewer productive factors. Only the ownership of these assets changes."
The problem is that in the UK, banks are pretty much the only "productive factors", our manufacturing base having shrivelled up thanks to the government's laissez-faire attitude.