Interesting Article in the Wall Street Journal
The article implies that this crisis is apart of a natural cycle adding a calming effect to what has happened to our economy and what will happen in the near future. I am still not convinced that we should be calm. This sort of crisis happened in the 1930's and was only saved by a "freak occurrence"(WWII).
I see either mass deflation ahead of us or, if the government is lucky enough, another "freak occurrence".
...Im not sure either scenarios will be very pleasant.
Some Key Points:
** “It’s wrong to blame this crisis on subprime mortgage lending, he says. Rather, this crisis is best seen as the latest of a series of banking crises throughout history.”
** “Repo is money… But, like other privately created bank money, it is vulnerable to a shock, which may cause depositors to rationally withdraw en masse, an event which the banking system — in this case the shadow banking system — cannot withstand alone.”
** “The fundamentals of subprime [mortgages] were not bad enough by themselves to have created trillions in losses globally.”
** “The crisis was not a one-time, unique, event. The problem is structural.”
** “There have been banking panics throughout U.S. history, with private bank notes, with demand deposits, and now with repo. The economy needs banks and banking. But bank liabilities have a vulnerability.”
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