Governments bail out money fuel the financial crisis fire than dousing it
Today, we see more and more government around the world are using all sort of “money printing” method to bail out the merchant banks and the market.
Indeed, it seems government want to help the bankers to recover the losing ground by giving them more money, ignoring the bad debts (e.g. credit cards) that piling up behind due to company failed to meet their payment.
In short, the corporate world that need the cash has been starving by governments policies to rescue the bankers, instead of giving the needed cash to the production field, government around the world just <strong>bust more company <strong> by helping the banks.
It is common sense, due to banks natures of “take the umbrella during rainy day”, banks will reluctant to borrow, thus cut down the lending pools. And some banks even taking step to reserved funds injected by governments in order to cushion their own credit card crunch, continue the high credit card interest rate Russian rollete to sustain their profit.
Unlike the experience learned from Asian financial crisis, I think the bail out are unlikely to work. Like massive forest fire, when the water dousing practice failed, the fire fighter will take another practice : cut off the fuel supplies, prevent the fire from spreading.
Forest Fire = debts defaults that bringing down the banks
Burning Forest = Bankers, insurer that burn the cash that needed by typical corporate to survive.
Healthy forest = Corporate and banks that are not burn by the subprime crisis. Nevertheless, some are lending money to banker that affected by corporate. And some corporate are having account in the “burning forest” banker.
Fire barrier = A zone that SEPARATE corperate from failing banks, thus allow the healthy forest continue to growth.
IMHO, the financial crisis are so wide spread that, the piling up debts from different financial product will be ignited by humongous debts defaults.
To prevent the “fire” spread further, government should create a barrier, froze the failure merchant banks debt interest, transfer healthy corporate that tied with those “burning” banks to healthy banks, and inject money to healthy banks to cool down the cash shortage.
This will save much lots of corporate, instead of letting corporate become part of the “fuel” that spread the financial crisis fire. As long as corporate (large industrial to SMI/SME) job-cut can be reduce, it will prevent corporeate loan and personal loan debts become the new round of burning fuel to the financial crisis.