A reader writes:
Everything I read about the current economic thing reminds me of the blind men describing the elephant. Niall Ferguson’s piece is worse than most in one way, because the guy touches two parts of the elephant, comes up with conflicting descriptions and then says they are still part of the same animal. How can “Excessive indebtedness” be described as THE problem? Did the debt occur by magic, was there no underlying cause why spending outpaced income? “Many governments are too highly leveraged.” If "one" is many, he’s right, since the only major government with massive debt is ours.
What’s interesting is that despite his flailing around for an explanation of what’s wrong even he recognizes that part of the solution is admitting massive amounts of capital are just gone.
But it’s really not rocket science anymore to see that the things calling themselves banks today need to be turned into something recognizable as banks before we can go forward and to do that they have to admit their money is gone.
But his “Second part” is just weird, not only because it’s stupid but because it’s stupidity actually goes against the first part. Taking somebody who owes 600K over 30 years at a rate that has adjusted up to 12% on a house that is now worth 250K and changing it so they still owe 600K but now it’s at 4% for 50 years doesn’t help clean up the banks, it leaves the toxic assets still on the books at the same value! And, since that house is unlikely to be worth 600K again anytime in the next 15 years what happens to people who have to move? Sooner or later people with negative equity WILL default. So instead of the economic downpour we have now we get economic drizzle forever.
The Dish 