Tuesday, December 06, 2011

Poor As Cover For Rich Looting

From Glenn Reynolds, Megan McArdle notes:
Runs on financial markets, as far as I can tell, do not righteously limit their damage to rich jerks who didn't need the money anyway. In fact, the people who suffer the worst from a rapid contraction of the credit markets are the poor. They're the ones who actually end up hungry and on the street when companies start failing and they can't get jobs.
What kills me is that when a manufacturing shop is shut down it's all "well that's the way it goes in the free market, sorry sucker!", but when a bank is on the outs all the sudden the bankers need subsidies for their jobs because the poor might get hurt!  Never mind the fact that the poor will pay in taxes, inflation and a crappy job environment to keep those monstrously inefficient enterprises alive.

Anyway, does it ever occur to these press types to question why a run would occur?  It's not magical.  It's caused by people doubting that a bank will be able to pay them back because the crooks that run the bank have A) over-leveredged it with B) bad assets.

Along those lines, Denninger notes that Bank of America may have constructed their banking division in such a way that the taxpayer will get boned via the FDIC AND depositors won't get paid back when if the bank goes under.  Riotous fun bunch those bankers!

UPDATE: Lots of hope in Europe that they'll be able to get the central bank to print Euros to cover up the mountain of bad debt over there.  Part of the issue that they're having is the slow motion bank run going on in especially the peripheral countries.  They need to ask themselves what's worse though: a run on the banks, or a run on the currency?  One destroys the economy, the other destroys a nation...

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