Friday, March 06, 2009

Are We Bankrupt?

Forbes Magazine has published an essay by Nouriel Roubini that concludes that "The U.S. financial system is effectively insolvent."

Roubini, professor of economics as the Stern Business School at NYU and labeled "Dr. Doom" in 2006 for his prescient predictions of the current global meltdown, also says the debate over nationalizing banks is "surreal." Here's a quote:
In the meantime, the massacre in financial markets and among financial firms is continuing. The debate on "bank nationalization" is borderline surreal, with the U.S. government having already committed -- between guarantees, investment, recapitalization and liquidity provision -- about $9 trillion of government financial resources to the financial system (and having already spent $2 trillion of this staggering $9 trillion figure).

Thus, the U.S. financial system is de facto nationalized, as the Federal Reserve has become the lender of first and only resort rather than the lender of last resort, and the U.S. Treasury is the spender and guarantor of first and only resort. The only issue is whether banks and financial institutions should also be nationalized de jure.

1 comment:

Flee said...

Bummer, what do we do now? Why can't they see what quite a few every day people have seen for some time? Why can't they not stop bailing out the wealthy?