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I'm taking a very long view on this.  Clearly the global financial system got totally out of kilter with the real economy and produced quantities of debt so vast that they cannot be repaid out of real economic activity any time in the foreseeable future.  Trying to fix that system now would destroy many good banks/businesses and any prospect of global economic recovery any time soon.

The solution is therefor a revolutionary one - but also a classical market one - i.e. let those instiutions which "went mad" fail and focus all state rescue efforts on those businesses which are vital to future economic activity.

DXebt finance as the dominant mode of finance is dead.  The future has to be built around much greater equity, bond, and revenue sharing models linked much more directly to productive enterprises where risks and rewards can be measured in a reasonably transparent way.  

Where I perhaps disagree with Migeru et al is that I don't believe there is a regulatory fix to the current system...  we need a new one... and that effectively requires a revolutionary transformation of how business is done, financed and regulated in the future - with debt being primary a vehicle for financing short term cash-flow requirements and longer term financing done through equity, bond, and revenue sharing covenants.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Mar 23rd, 2009 at 09:51:33 AM EST
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