In the Great Depression, the profligate banks failed, insolvent. The wealth of their depositors was lost as the banks, having wasted it, could not provide it to its legitimate owners. From that failure, the banks vanished.
In the 2008 financial crisis, the banks failed again bu t this time, we heard a new mantra: “Too big to fail” and in response, the government recapitalized the banks at the expense of the taxpayers, using debt so that said taxpayers would not notice. It would be their children and grandchildren who would actually pay.
But that recapitalization did not fix the problem; it merely papered over it for a time. Too many of the bank’s loans will not be repaid by too many enduring a declining living standard; that reduces the value of derivatives capitalizing said banks. They will collapse again – soon.
But this time, the government is prepared. So are…
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