Search This Blog

Saturday, October 11, 2008

"We are All Minskyans now": Support of Partial Nationalization of Financial Markets

The Fed Chair and Treasury Secretary and a number of rich nations have all agreed yesterday on a course of action which would essentially, at least partially, nationalize the banking / financial system worldwide.

I support this measure as an unfortunate necessity of our times. I've come to the conclusion after much thinking and much observation that the only way the government can attempt to end this crisis is to reduce the massive uncertainty in our banking and financial institutions. Having only one or two major / rich nations do this would be problematic as it would facilitate the flow of financial capital out of those troubled countries that failed to nationalize and toward those that did. No, to be beneficial globally, it has to be a global agreement. And it looks like that is what it will be.

Just throwing money at banks is more harmful than good as I mention in previous posts - again to reiterate, reduced interest is beneficial for those that want to consume or invest or borrow money for further lending (banks), but is hardly beneficial to banks and financial intermediaries that want to borrow when the banks they want to lend from have no incentive to do so, and that is where the real problem is. The problem isn't on the borrowing side of the equation, it's on the lending side.

By buying stock in failing banks etc., we assure other banks and customers etc. that that institution has the backing, support, and partial ownership by the government. This expectation alone immediately boosts the banks credit worthiness and reduces the uncertainty that if I as a bank lend to that institution, it could very likely fail. The idea is that interbank lending will eventually increase back to normal, and eventually the money will end up on main street where it belongs.

In order for this to work, massive amounts of stock will have to be bought. 700 Billion will not be enough to stop the global crisis. The entire system has to be normalized, and that will require a lot of nationalization.

Will this mean the end of capitalist financial markets? Not entirely, but it will mean the end of next-to-no-holds-bars financial markets. it will mean a true oversight by big government, and by the Central banks of the world. It will mean Hyman Minsky's predictions will have come true.

It's the end of an era. And the beginning of a new one.

4 comments:

oakleyses said...

polo ralph lauren outlet, michael kors outlet, nike shoes, oakley sunglasses, ray ban sunglasses, michael kors outlet, coach factory outlet, ray ban sunglasses, chanel handbags, jordan shoes, prada outlet, louboutin, burberry outlet, true religion jeans, michael kors outlet, christian louboutin shoes, louis vuitton handbags, tiffany and co, oakley sunglasses, burberry outlet, nike free, louis vuitton, prada handbags, louis vuitton outlet, true religion jeans, gucci outlet, longchamp outlet, louis vuitton outlet, michael kors outlet, coach outlet, longchamp handbags, tiffany and co, michael kors outlet, michael kors outlet, louis vuitton outlet stores, air max, coach purses, tory burch outlet, kate spade handbags, polo ralph lauren outlet, coach outlet store online, louboutin, louboutin outlet, air max, kate spade outlet, longchamp handbags, oakley sunglasses cheap

oakleyses said...

nike roshe run, ray ban pas cher, nike free pas cher, sac louis vuitton, michael kors, sac guess, sac louis vuitton, air max, louis vuitton uk, abercrombie and fitch, oakley pas cher, lululemon, barbour, north face, louboutin, mulberry, polo lacoste, nike air max, vans pas cher, longchamp, vanessa bruno, hollister, hogan outlet, michael kors, air max pas cher, new balance pas cher, ray ban sunglasses, air force, timberland, true religion outlet, true religion outlet, converse pas cher, polo ralph lauren, nike free, north face, sac burberry, hollister, nike tn, nike roshe, sac longchamp, nike trainers, ralph lauren, michael kors pas cher, nike blazer, air max, louis vuitton, air jordan, sac hermes

oakleyses said...

ghd, soccer shoes, canada goose, uggs outlet, canada goose jackets, celine handbags, babyliss pro, birkin bag, reebok outlet, abercrombie and fitch, nike huarache, asics running shoes, longchamp, bottega veneta, lululemon outlet, ugg boots, mcm handbags, hollister, valentino shoes, insanity workout, wedding dresses, rolex watches, ferragamo shoes, jimmy choo outlet, soccer jerseys, ugg pas cher, canada goose, north face outlet, north face jackets, p90x, giuseppe zanotti, chi flat iron, canada goose outlet, canada goose, ugg australia, beats by dre, mont blanc, herve leger, instyler, vans shoes, mac cosmetics, canada goose uk, nfl jerseys, nike roshe run, new balance shoes, ugg, marc jacobs, ugg boots

oakleyses said...

links of london, juicy couture outlet, louis vuitton, moncler, pandora charms, moncler, moncler, vans, pandora jewelry, lancel, louboutin, hollister, karen millen, moncler, air max, iphone 6 cases, parajumpers, ralph lauren, thomas sabo, montre homme, oakley, ugg, rolex watches, toms shoes, baseball bats, ugg, canada goose, coach outlet store online, converse shoes, hollister, canada goose, supra shoes, juicy couture outlet, gucci, moncler, timberland boots, swarovski crystal, converse, pandora charms, moncler outlet, ray ban, wedding dresses, hollister clothing store, swarovski, air max, moncler