megaspora » 2008 » October

Archive for October 14th, 2008

Let it all fall down

By: psr, 2008-10-14

Governments around the world are trying out different formulae to tackle the financial crisis. They claim they are trying to reactivate the financial sector, to encourage banks to offer loans to small businesses and people, and to other banks. Other cases of government intervention are focused on preventing banks from going bankrupt.

This is all wrong. If the financial sector is in a financial crisis, let the financial sector sweat out its own illness. Any part of it that cannot survive the crisis should simply be left to die, because its demise means that it has no value. The crisis must be allowed to work as it should, promoting consolidation, discarding some old players and creating opportunities for new players to enter.

Government intervention is absolutely wrong. …