The Next Financial Crisis – It’s coming–and we just made it worse

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Peter Boone and Simon Johnson:

The Next Financial Crisis

It’s coming–and we just made it worse.
During this crisis, Bernanke–while saving the financial system in the short term–has done nothing to break this long-term pattern; worse, he exacerbated it. As a result, unless real reform happens soon, we face the prospect of another bubble-bust-bailout cycle that will be even more dangerous than the one we’ve just been through.
Banking was once a dangerous profession. In Britain, for instance, bankers faced “unlimited liability”–that is, if you ran a bank, and the bank couldn’t repay depositors or other creditors, those people had the right to confiscate all your personal assets and income until you repaid. It wasn’t until the second half of the nineteenth century that Britain established limited liability for bank owners. From that point on, British bankers no longer assumed much financial risk themselves.

Peter Boone is chairman of Effective Intervention, a Britain-based charity, and a research associate at the London School of Economics’s Centre for Economic Performance. Simon Johnson is a professor at MIT’s Sloan School of Management and a senior fellow at the Peterson Institute for International Economics. They write for The Baseline Scenario, a blog on economics.

Simon Johnson, Professor at MIT:

the Fed has operated in a manner that encourages the formation of sequential bubbles.  This destabilization of our financial system is not a minor matter; the damage caused – human, financial, social – is already enormous.

And we are very far from being done.

Nassim Taleb:

Nassim Taleb on the economy

‘We still have the same disease’

…

the government is socializing all these losses by transforming them into liabilities for your children and grandchildren and great-grandchildren. What is the effect? The doctor has shown up and relieved the patient’s symptoms – and transformed the tumour into a metastatic tumour. We still have the same disease. We still have too much debt, too many big banks, too much state sponsorship of risk-taking. And now we have six million more Americans who are unemployed – a lot more than that if you count hidden unemployment.

Shamus Cooke, Counterpunch:

Not only are the same people who helped destroy the economy still in their immensely powerful positions, but their power has increased.

The super banks that emerged from the wreckage are still participating in the same ultra-risky financial gambling that ruined the lives of countless people. In fact, the banks’ bad behavior has been incredibly reinforced

The problem is that Obama crammed Wall Street executives into every crevice of his administration, while Congress, too, is inundated with lobbying (legal bribes) from the big banks.

Janet Tavakoli at maxkeiser.com

Risk of deflationary collapse greater now than in 2007, Janet Tavakoli

Regarding the outlook, my analysis is grim.  I am not a doomsayer, I follow the cash, and so far, I’ve been correct, and the government has been wrong. Here’s the situation.

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Eingeordnet unter Money

Schlagwörter: Bernanke, financial crisis, next crisis