was asked a few days ago by Zócalo Public Square, a not-for-profit daily Ideas Exchange, to contribute a brief comment to coincide with their upcoming event "Can We Fix What's Wrong With Banking?"
I was specifically asked to address the question "should we have bailed out the banks?" Here is my response:
No, we should not have bailed them out. That’s the easy question.
Now that we have bailed them out, however, here’s the important question: "Will we fix what’s wrong with banking before there is a global currency crisis?"
??On that score I have my doubts. ??The simple fact of the matter is we have a massive mountain of debt everywhere you look: Federal debt, State and local debt, student loans, housing, unfunded liabilities in Medicare and Social Security, and untenable pension promises at every level of government.
Most agree that is a problem. Unfortunately, that’s where the agreement stops.?? Yet, before we can address the debt crisis, we have to understand how it happened. ??
The source of the debt crisis is two-fold:
Fractional Reserve Lending
Fed (central banks in general)