Sunday, 29 March 2009

Current crisis - a watershed event or just a temporary interruption?

Is the current financial crisis a watershed event in the evolution of what we somewhat amusingly call capitalism or is it just a temporary interruption where normal service will be resumed as soon as possible?

Paul Krugman definitely takes the former view in these excerpts from an article entitled The Market Mystique at his New York Times blogsite.

In essence, the administration seems to believe that once investors calm down, securitization — and the business of finance — can resume where it left off a year or two ago.

As you can guess, I don’t share that vision. I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.
My own suspicion is that the Obama administration is committed to try to resume normal service as soon as possible and in so doing will be sowing the seeds for an even larger structural crisis down the road.

1 comment:

  1. Carrie Armitage, Canada29 March 2009 at 08:59

    Given that you were correct about your predictions of what is happening today, some 20 years ago, I fear you may be right again Clive.