Comments on: Big Banks http://www.economyguy.com/big-banks/ Economic News For Everybody....by Tom Harvey and Cyrus Uible Sat, 03 Jul 2010 03:53:46 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: David http://www.economyguy.com/big-banks/comment-page-1/#comment-1433 David Tue, 02 Feb 2010 00:14:51 +0000 http://www.economyguy.com/?p=658#comment-1433 The fundamentals don't look too good do they? We have unsustainable debt and the only solution is to add more debt to cover payments due now. Sounds like a debt death spiral to me. However, what other country doesn't have the same problem? We think our debt problem is bad (and it is), but other countries have even higher debt to GDP ratios. That's a scary thought. You asked what to do to prevent a future meltdown. Well, it seems the current meltdown is well underway since 2000 (right in line with a K-wave). We didn't see our problems until 2008 because spending was upped by Bush and interest rates were dropped by the Fed. Just proves that masking a problem doesn't make it disappear. If/when we survive this downturn, I'd like to see simple safety measures taken to limit unsustainable speculation and short term thinking/risk taking. Here are a few ideas: - Yep, new version of Glass-Steagall. Separate commercial banking from more risky investment banking. - Limit home loans to 80% LTV (people will just have to save and borrower from their parents like before) - Limit home loans to full doc (don't like it, then pay cash) - Limit explosive derivatives - Limit leverage on Wall Street to much lower levels - Institute debt free money (directly issued by the USG) - Eliminate defined benefit pensions (unsustainable ponzi scheme) - Eliminate labor unions (especially for government employees) - this would drop wages so the US can compete globally, bring manufacturing back This is a shortlist of needed reforms but it seems hard to get them implemented when we have such huge structural problems now AND entrenched special interests. I guess we'll just "muddle through." The fundamentals don’t look too good do they? We have unsustainable debt and the only solution is to add more debt to cover payments due now. Sounds like a debt death spiral to me. However, what other country doesn’t have the same problem? We think our debt problem is bad (and it is), but other countries have even higher debt to GDP ratios. That’s a scary thought.

You asked what to do to prevent a future meltdown. Well, it seems the current meltdown is well underway since 2000 (right in line with a K-wave). We didn’t see our problems until 2008 because spending was upped by Bush and interest rates were dropped by the Fed. Just proves that masking a problem doesn’t make it disappear.

If/when we survive this downturn, I’d like to see simple safety measures taken to limit unsustainable speculation and short term thinking/risk taking.

Here are a few ideas:
- Yep, new version of Glass-Steagall. Separate commercial banking from more risky investment banking.
- Limit home loans to 80% LTV (people will just have to save and borrower from their parents like before)
- Limit home loans to full doc (don’t like it, then pay cash)
- Limit explosive derivatives
- Limit leverage on Wall Street to much lower levels
- Institute debt free money (directly issued by the USG)
- Eliminate defined benefit pensions (unsustainable ponzi scheme)
- Eliminate labor unions (especially for government employees) – this would drop wages so the US can compete globally, bring manufacturing back

This is a shortlist of needed reforms but it seems hard to get them implemented when we have such huge structural problems now AND entrenched special interests.

I guess we’ll just “muddle through.”

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