Pundits are finally putting their finger on the real problem that’s caused all this financial uncertainty: lack of trust.
WASHINGTON, Oct. 12 (UPI) — Allowing Lehman Brothers to fail was a mistake that spilled to the U.S. money markets and snowballed, Art Cashin, UBS director of floor trading, said Sunday.
“I think in hindsight it’s pretty clear that it was a drastic error to let Lehman go under,” Cashin said on ABS’ “This Week with George Stephanopoulis.” The financial systems crisis quickly “went from Wall Street and the banks to Main Street and business and we could see more of that.”
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“We’ve got a problem of trust — people trusting their money and financial institutions, financial institutions trusting each other, the whole economy trusting the government policy framework,” Summers said. “And anytime you’ve got a problem of trust, you’ve got to deal with it in a very aggressive way.”
Capitalism won’t work unless people who are winning in the glorious global marketplace have trust that they will go on winning. It’s simple really when you think about it. Sharemarkets only function properly if they keep going up forever. Same with real estate. Job markets need workers to believe they can never get laid off.
Any time it looks like someone will lose their winnings, the government has to step in and protect them. The government does this by going into debt, which is OK because it can be inherited by the next conservative administration who will spend their time in office bemoaning the financial ineptitude of their predecessors and then preening themselves over their economic management brilliance as they pay it off.
There you go - a political-economic template for a successful future. Just let me know when to pick up the Nobel.
