Tuesday, November 13, 2012

When facing a cliff… are you sure you want to go forward?

This economy did not collapse because of lack of stimulus, it collapsed because of bad regulations that gave banks too big incentives to acquire huge exposures with some of “The Infallible”, helping to make the not-risky risky, and by banks not wanting to hold exposures to “The Risky”, like to small businesses and entrepreneurs.

And since those basic bank regulation principles have not yet been changed one iota, I simply do not understand why any sort of stimulus package should be able to turn around the economy in a sustainable way, and that is why I find the whole discussions in the US about the fiscal cliff, although interesting quite irrelevant. 

And this cliff debate also makes me remember some politician somewhere gloriously stating: “We are standing in front of the precipice; it is time to take a big step forward”.