The financial systems worldwide is in turmoil. The U.S. is saving what it must save at considerable taxpayer cost. Much more can be done, but the politics of moral hazard is blocking action. I will argue there is a much greater moral hazard issue to take into consideration.
I'm not an expert economist and I'm not an American, although it will sound like it for a while. I'm educated enough to understand the arithmetics involved in this economic crisis we are in. I've heard enough half-truths and experience enough cover-ups in my life to have a sense of when I'm not told the complete truth. Most importantly, I love to live in the free world and I have basic training in crisis management to come to the uneasy conclusion we are morally risking faith in capital and capitalism by not exercising true crisis management in this moment of once-in-a-lifetime crisis.
We have the resources - the government balance sheet, our money - to quickly address this out-of-control financial situation and fix it. It is going to cost. Very much. It involves nationalizing a majority of US banks the way we nordic countries cleand up their banks in the ninties. We know from financial crisises around the world that we can choose between the Japan style crisis management meaning 20+ years of stagnation or the Korean style meaning three years of chock and then back to business.
At a major catastrophic event with many unknown factors, your first crisis management responses is always to go out with everything. If there's a major highway accident with lots of cars, you don't ask how many. You send all ambulances you got. You can always bring back them as the information becomes clearer about what has happened. When the Tsunami hit Thailand, The Swedish response (the wrong way to do it) was to wait for more information on what had happened. That took days. The Italians on the other hand did not wait for anything, they ordered Alitialia to supply the planes, gathered the equipment and personel and off they went to Thailand within 24 hours.
At this point in the financial crisis, few if any has the necessary overview. We should choose the Italian response: act massively and act now. What is diabling us from acting is the cost of it and the consept of moral hazard. A moral hazard that if we bail out the system, next time even grater risks will be taken.
Nobody talks about the moral hazard that people loose faith in our dreams of free will and self determination. Free markets are not the goal of our society, but it is a necessary means. A communist system do not need to risk financial meltdown like we do, because capital markets have no place in a system not designed to let people try their own wings.
We need capitalism to enable us all to try and find our own happiness. I personally consider our capital system to be imperfect, but it's the best system we got. It's the best system anybody got. At this critical movment, do we belive in our freedom. Do we believe truly in the spirit of the american constitution? The UN declaration of human rights? For all people of the world longing for a better day and a chance to prove themselves, can we continue our endeavors and pursue our dreams without properly functional capital markets?
I think, the society we try to build - and we are far from there - includes as sound financial system. The only morally right thing to do to show the world that we belive 100% in all this, is to take control of that asset. At any cost. The true moral hazard is that the rest of the world see us hesitate thinking we may not ourselves value this freedom so high as we say.
Is it so?
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