The economy is not in that bad a shape. all that is required is for the bankrupcy system to take out the bad banks and help the rest by reducing the number of banks. the reason  the banks are in such bad shape is that the fed funds rate was so low then they went up so fast it hampered the economic expansion by trying to expand it to fast then curtail it to fast then expand it to fast again. fundementally we should have a fed funds rate of about 1.50% or less. the investment of government money into banks as a way of giving them money was a bad idea in that some of these banks will not be able to rebuild fast enough to please wall st. forced amalgamation is a good plan which some have succeeded in doing IE bear sterns and you can see where some will ignore the government like lehman brothers which simply could not make money off its balance sheet. Now why can we not deflate the economy now like we did in the early 1990 period. 1. banks do not have large % of high yield loans or bonds to fall back on which means they can not make enough money to cover expenses anymore. 2. only a few superior rated debts are in the 15% range anymore and most of them are US treasury bills of the late 1970 to early 1980 which means the banking system is cash rich and just can not in the present market make money due to others competing for the small number of debtors that are able to make payments on such debts even at such low % rates

 

Sincerely,

 

Keith

I do not advocate the US be an isolationist economically or in any respect of international matters.  But, I do invite  the rest of the world to 'go it alone' if you really do believe the US to be a liability.

 

---  CHAS