Kantoos wrote another great article about forced recapitalizations.
In this comment a reader named “Genauer” writes:
„forced recapitalization“ = Chavez like nationalization ?
The socialist Steinbrück tried this before with the „Deutsche Bank“ in 2008, which didn’t need any government capital then and now.
I ll oppose all force in this, very strongly.
From a free-market point of view the European (and American) banks are in fact bankrupt. The only reason why those banks are not bankrupt in reality is massive state intervention since 2008, paid for by the taxpayers.
From a free-market point of view those banks don’t even exist anymore. The only reason why they still exist is because the banks insist that they are „too big to fail“. This might even be true.
So you need to do two things at the same time: Saving the banks while punishing their owners. This can be achieved by the very measures Kantoos is explaining so well.
After you stabilized the system you should think about measures that decrease the risk of a ‘too-big-to-fail’-situation. Breaking the banks up in a smart way might help.
Those exact measures have been promoted by strict classical liberals a.k.a. libertarians a.k.a. ‘neoliberals’(=the favourite German scapegoats) all along. And (at parts) by the conservative German mainstream media as Kantoos points out.
The Left has been demanding quite the opposite all day long: Bank taxes and Tobin taxes. Or as Obama calls it: ‘The Financial Crisis Responsibility Fee’. The plans by Merkel and Sarkozy are pretty similar.
It’s really smart to increase taxes on banks. In reality those taxes have to be paid by customers. Then at the end of the day Merkel, Sarkozy and the Left realize that they still have to recapitalize those exact banks. That’s so ingenious.
Alone from those ignorant actions you can see that this is not an exclusive banking crisis. It’s a political crisis just as well. Governments and banks work hand-in-hand. A lot of toxic assets that cause our problems are government bonds. The bubble at the American housing market was not caused by banks alone but heavily initiated and pushed by politicians who wanted to make every American voter a home owner.
Ironically now exactly these kind of politicians are supposed to manage the crisis. Politicians who promise their people everything under the sun and are therefore elected by the people over and over again while in reality they finance their many election gifts simply by increasing taxes and debt.
In short: What we need is a miracle.
I guess it’s so hard to achieve this miracle because running into debt is a result of democracy and eventually a part of the human condition. The human condition can not be changed. Socialists always try to change the human condition but so far they always failed. I’m sure they will continue to fail and I’m happy about that.
Keynesians also seem to think that they can fool the ‘animal spirits’ and therefore influence the human condition. I got my doubts about that.
In these days the usual suspects crawl out of their caves and proclaim the end of capitalism for the 100th time. For them capitalism is a vicious cycle and a ponzi scheme. A system that has to be abolished. The rhetoric is basically the same since the 1840s and 1930s.
In my opinion capitalism is not a vicious cycle but a virtuous cycle. The cycle of the Industrial revolution. The cycle of growth. A cycle that made us who we are:
A society so rich that it can waste its money on bad banks and bad governments.
A society so kind that even their greatest knuckleheads and enemies are nursed like kindergartners.
Nearly all politicians and many economists promise a world without bubbles and more and more people share this twisted mindset. This development really frightens me. Such a world would be a horrofic dystopia. Growth and bubbles are two sides of the same coin. There are already places on earth without bubbles: Cuba, North Korea, Venezuela, Iran. Those countries got no exaggerations at all – just one big forever going depression.