From Pine View Farm

When Zombie Banks Walked the Earth 0

Dean Baker in The Guardian:

This backdrop in extremely important in assessing the “fix the banks” battle cry of the economists who did not see the housing bubble. The word from this distinguished group is that if we can get the banks lending again, then the economy will be on its way to recovery. Coincidentally, the central ingredient in their formula is throwing hundreds of billions, or even trillions, of taxpayer dollars at the banks. In other words, they want to impose huge taxes on ordinary workers to give more money to the people who were most directly responsible for the propelling the bubble.

The elite economists tell us that even if this idea might offend our sensibilities, it is the only way to get the economy going again. This is where a little basic economics would be useful again.


In other words, the arithmetic shows that a bank fix, while desirable, cannot possibly be sufficient to offset the collapse of the housing bubble. If our priority is to save the bankers from suffering the consequences of their own mistakes, then it makes sense to throw all our money at them. But if the point is to fix the economy, then we have to look elsewhere.

Those of us who know economics recognise this fact. Those who insist on the bank-fix route should be asked one simple question: “When did you stop being wrong about the economy?”


Comments are closed.