The New Wild West Economy
by Charles Glass
June 02, 2010
The financial geniuses who caused, yet failed to predict, the world’s financial collapse are not doing much yet to avoid another crash. Given that I didn’t predict it either, I am as qualified as they are to propose “the way out.” Tim Geithner, Larry Summers, and many other bankers brought us to this pass, so they may not be the ones to take us out again. Maybe I’m not either, but at least my finger prints are not all over the corpse of the world’s economy. So, here goes.
Let’s try two economies. We can call one the Wild West and the other The Club. In the Wild West, banks, insurers, hedge funds, and other financial institutions can do what they are doing now, what they were doing that caused the crash, and what they will undoubtedly go on doing to cause another crash. This is the system that both the president of the United States and Britain’s new prime minister already permit. The big money boys who opt to remain in the Wild West can take the risks they always have, but the risk would be theirs alone. The government must make it clear that, in this free-for-all sector, the state will never come to the support of anyone who goes down. Investors, managers, lenders, borrowers, depositors et al. are on their own. Ayn Rand, Rand Paul, and Allan Greenspan would be at home in the Wild West. The poor schmucks who paid the taxes that bailed out the banks, insurance companies, and other flimflam operators who went bust last time will never have to do so again. The cowboys can look after themselves. The Club is for the rest of us.