Paul Krugman on the state of the banks and where we can go from here.

My Commentary:

After years of “wrong living”, the financial system was on its death bed and like any good child we spared no expense to keep it alive.

But now it’s back, well, standing at least. But it’s a 65 year old retiree with gold chains and a velour jump suit. It looks good but it’s not doing any work, at least nothing that benefits anyone but itself. The glamorous and flashy aspects are up, but it’s not doing its fundamental job very well.

Like anyone who is old and stuck in their ways, the Banking industry will fight reform tooth and nail. “Vegetables and exercise? How about I just do that diet where I only eat Filet Mignon?”

Long story short, reform has to happen now. Forcing open lending will stimulate small businesses and thus the larger economy and, hopefully, build a virtuous cycle. If not, it’s back to the hospital, or in this case, 15 years of slow growth before we’re out of this mess.

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posted: 09 October 19
under: Economics