One reason places like Cyprus and Iceland get so much business is because of their bank secrecy laws. They don't have to tell nobody nothin'. So people with ill gotten gains like them. If you were a bank doing business with the mob, you might want to be careful with your money, and not go making risky loans to your brother-in-law in Florida. I mean, if your bank were to go bust, there are some not-very-nice-people who are going to be very unhappy with you. I wonder how many bank managers have died in mysterious circumstances since the Iceland debacle happened?
Rooting around for some evidence to support my wild speculations, I stumbled over this little bit on the Recovery Partners dot biz blog:
Under capitalistic forms of economic organization, Banks must ordinarily be held accountable to deal with their distressed credits promptly and the public balance sheet must not be used to subsidize bad risk decisions nor to prop up zombie companies at public expense and to the ultimate detriment of employees, taxpayers and other more efficient and productive entities."Financial Repression". What a fine term.
However, this departure from the norm in order to favor creditor interests is exactly what has been happening.
These policies of Financial Repression have been followed before. The most obvious examples are failed communist states many of whom had to abandon the experiment over twenty years ago with the fall of the Berlin Wall and more recently, hyperinflationary Zimbabwe. Some examples in the developed economies include New Zealand in the late 1970’s / early 1980’s before the 1984 collapse and Germany in the immediate Post WWI “Weimar” period. In every instance, the outcome of these episodes was negative. Today, the Europeans (and North America and Japan) are conducting policies of Financial Repression in a variety of formats.
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