This is a crisis of solvency, not just liquidity, buttrue deleveraging has not begun yet because the losses of financial institutions have been socialised and put on government balance sheets. This limits the ability of banks to lend, households to spend and companies to invest...
The releveraging of the public sector through its build-up of large fiscal deficits risks crowding out a recovery in private sector spending.
After finishing The Black Swan, I realized there was a cancer. The cancer was a huge buildup of risk-taking based on the lack of understanding of reality. The second problem is the hidden risk with new financial products. And the third is the interdependence among financial institutions.
Ben Bernanke saved nothing! He shouldn't be allowed in Washington. He's like a doctor who misses the metastatic tumour and says the patient is doing very well.
Nobel prize winning economist Joseph Stiglitzcallsit "socialism for the rich". So do many others.
Some, however, argue that the economy is more likefascismthan socialism. For example, leading journalist Robert Scheerwrites:
What is proposed is not the nationalization of private corporations but rather a corporate takeover of government. The marriage of highly concentrated corporate power with an authoritarian state that services the politico-economic elite at the expense of the people is more accurately referred to as "financial fascism" [than socialism]. After all, even Hitler never nationalized the Mercedes-Benz company but rather entered into a very profitable partnership with the current car company's corporate ancestor, which made out quite well until Hitler's bubble burst.
And Italian historian Gaetano Salveminiarguedin 1936 that fascism makes taxpayers responsible to private enterprise, because "the State pays for the blunders of private enterprise...Profit is private and individual. Loss is public and social" (page 416).
This perfectly mirrors Roubini's statement about the American government's bailout plan.