Fiddlers always survive

Typical for every crisis is, that the guys who caused it are not really hit. A good example are the communist leaders of the German Democratic Republic which went bancrupt in 1989 and was “bought” by the the Federal Republic of Germany much like  bancrupt banks are bought now by government. The most important subject during the reunion negotiations was how the the salaries and pensions of the communist leaders are secured after the breakdown of the country.  These crooks now receive “Salaries and Pensions of Honor” much like ministers and government employees in the West. Guess what will be the most important subject when the government takes over the control of banks?

Why Europe should help the US in the financial crisis

Although most of the worldwide fincial crisises from 1929 to today have started and were rooted in the US, Europeans were always playing the game too by pumping their customers money to the US in return for the promises of higher profits. Thus it is only fair the Europe takes a fair share of the financial hits. People in Europe should also be reminded that the the US was financing with the Marshall Plan the broken economies in Europe after World War II, although the US was really not to blame for it. This is a good example how all involved parties can benefit from financial support in difficult times.

Why we should not save the banking systems

The current wordlwide banking system has created a world of virtual money, which is not backed by real products and real money. Its whole purpose and was to take real money from hard working people to reward the people involved in the schemes. We should not pump additional money in this wrotten fraud based industry. However, we should spend money to protect the real economy and the people. Just a simple example: government should not back the bad housing loans of the banks but should help the people to reevalute their house (probably very often only 50 % of the assumed price) to allow them to pay back their mortgages on the reduced value with their regular income. This would also reduce the property taxes which people no longer can afford. Certainly this would cut the profits from loans in half. However, this would help the people and maintain the current system. Certainly the banking system would have to take the hit by eliminating the amount of virtual money floating around, which must by the major goal of any reform to the banking system.

The proposed scheme is applicable not only in the US but also in UK, Spain, Ireland, Iceland etc where tons of bad housing loans are floating around much like in USA.

PS 1/3/2009  The NY Times article “How to repair a broken financial world” by Michael Lewis and David Einhorn describes the proposed method in more elaborate words.  Thanks.