Tuesday, July 3, 2012

Sunk by Sunk Costs

Roger Bootle thinks it's time to start anew when it comes to the banking crisis:
A large part of the economic problem consists of the weight of past mistakes on the present. This is the case with the banking system. Banks are not lending partly because of bad assets hanging over from the past. And that is surely the essence of why others are reluctant to lend to them, or invest capital in them. 
The solution must be to unshackle from the past. Establish new banks, publicly funded if necessary, with new balance sheets and new people, unweighed down by the mistakes of the past, and/or to find new ways of finance that bypass the banks. Too much interventionism? Too much ideological baggage, more like it.
Roger's right, but I think he ignores how much governments are now part of the banking problem. When governments owns the broken banks (as is the case in Ireland and the UK) then the sunk-cost fallacy takes over. Starting anew is the last think politicians are willing to do - especially when they've sunk €63 billion of taxpayers' money into the broken banks.

So if sunk-costs are the problem then we'll have to support a parallel banking system - here's 20 examples of crowd-sourced fundraising platforms for businesses and even universities. And then there's Zopa.


1 comment:

  1. If you have a letter via the Internal Revenue Service and you could be scared to get hold of the Internal Revenue Service the site http://www.tax-defense-network-cpnotices.com/cp-notice/understand-irs-notices/ will give you specifics about your letter so that you can understand where to start, the ultimate way to interact, and what you need to prepare for.

    ReplyDelete

Related Posts Plugin for WordPress, Blogger...