Quote:
Originally Posted by Nancy
Say what... What I remember of the Japanese crisis was that the Japanese government was criticized for continuing to prop up bad banks, thereby delaying the restructuring that was required.
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Exactly.
The banks have to either be completely nationalized with their bond and/or shareholders completely wiped out or they have to be allowed to fail completely with their bond and/or shareholders completely wiped out.
The longer they put that off the longer this lasts.
Just like in Japan where they tried to help everyone and make sure no one had to live up to their mistakes and poor risk taking.
Trillions in bad debt needs to disappear off the books before the markets can recover and to do so trillions of dollars supporting that debt must be forfeited by someone. At this point it seems to be mostly the tax payer but frankly the American-gov cannot afford to absorb ALL of those losses (as they are bigger than the ecomomy itself) so something has to give.
Right now America is headed in the Japan direction where they will keep printing more money, they will keep propping up companies that should be dead and they will keep their 'friends' out of trouble as much as they can. No two scenarios are ever perfectly alike but their are similarities and similar moral hazards.
Over a long enough run the markets always balance. You cannot do all of the things that have been allowed to happen in America over the past 5, 10 and 20 years and not have a sustained and major fallout.
Claeren.