Tuesday, August 9, 2011

Why is this "financial crisis" taking so long to clear?

Bankruptcy.

In the past, financial crises seem to come and go relatively quickly. The business cycle was somewhat predictable and understood.

Today, nobody wants to feel the pain. We have regulators and stakeholders at all levels claiming that the end is near unless we bail out "too big to fail" entities.

What is wrong with letting countries like Greece or Ireland or Iceland default? We used to let that happen all the time (e.g., Mexico, Russia, Argentina, Brazil). Lenders to those countries took their loses and moved on ... and eventually they all recovered in a relatively short period.

What about letting banks like Goldman or Citibank go bankrupt or letting people that took crazy loans lose their properties?

What happened with the good old - you messed up, you go bankrupt, and everybody moves on and rebuilds. When did we decide that nobody is responsible for their financial decisions anymore?

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