Debt is a mistake between lender and borrower, and both should suffer. Normally debt would get destroyed and turn to air. Today we still have the same amount of debt, but it belongs to governments. : But aren’t those the very problems we’re supposed to be fixing? And the third is the interdependence among financial institutions. The second problem is the hidden risk with new financial products. The cancer was a huge buildup of risk-taking based on the lack of understanding of reality. Nassim Nicholas Taleb says the same thing:Īfter finishing The Black Swan, I realized there was a cancer. We’re essentially continuing a system where profits are privatized and…losses socialized. The releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending.
This limits the ability of banks to lend, households to spend and companies to invest…
This is a crisis of solvency, not just liquidity, but t rue deleveraging has not begun yet because the losses of financial institutions have been socialised and put on government balance sheets. Economists and financial experts say the same thing.įor example, Nouriel Roubini writes in a recent essay: Initially, it is important to note that it is not just people on the streets who are calling the Bush and Obama administration’s approach to the economic crisis “socialism”. What is the current American economy: capitalism, socialism or fascism? By George Washington of Washington’s Blog.
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