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Although started due to a banking crisis, the current recession is now continuing because of a massive decrease in aggregate demand, not because banks are having trouble lending, so no solution to banking, even if it is indeed still broken, which I doubt, will help us get out of the worldwide recession any sooner. (Another way to think about this is that if housing prices suddenly went up, the banking crisis would also be over.)
True, and very artfully phrased.  But what caused the banking crisis?  It would appear that it was caused by a massive and unsustainable increase in real estate valuation that was enabled by a loose money policy combined with rigorous "see no evil" regulation at the Fed and at other regulatory agencies, especially since 2002. (Another way to think about this is that, were we only able to get the bubble to "un-pop" all would again be well.)

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jan 22nd, 2009 at 01:37:17 PM EST
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