I think that's a good idea in principle. But it would mean going back on a lot of already granted guarantees. Many governments have already de facto taken on many bank liabilities by guaranteeing their debts. In that context, the governments would have to either repudiate those guarantees that covered bad debt or take direct control of the banks' assets - anything else is just a handout to the current shareholders and management.
And I'm not quite sure what would happen if you started rolling back the already given government guarantees. The hot money might panic and pull an East Asia on us. So you'd need to corral in the hot money with capital controls first (and preferably then proceed to take it away from the gamblers who have it right now).
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
The one exception is the Lehman bankruptcy, and this one is now widely seen by the Villagers as the biggest mistake that was made. In the long run, we're all dead. John Maynard Keynes
Btw. when shall overdebted consumers and undercapitalised enterprises start to get out of debt? Isn't overreliance on debt one symptom of the anglo disease? I wonder re:Krugman et al. WHEN will be the time to stop that fast accumulation of debt? Der Amerikaner ist die Orchidee unter den MenschenVolker Pispers
We have to deal with the fact that there is too much debt around. The long term goal should be to reduce it, but the short term one should be that it be done in an orderly way, and only the government can coordinate that. In the long run, we're all dead. John Maynard Keynes
