It's highly unlikely that they would publish it, I have no professional background in the field, and I'm just not that good a writer, but what the hell.
Amputating the Financial IndustryThoughts?
It is clear that the economy is sick, and it is also clear that the two things that are most directly responsible for this are the finance industry, and real estate.
For real estate and construction, we have a classic bubble, where prices outstripped values, and the only real solution is for time and no small amount of inflation to put borrowers back above water.
The finance industry is a different matter. Between the Treasury Department and the Federal reserve, trillions have been spent to recapitalize this industry without a real thaw in credit.
If the economy is a body, it is clear that there is a serious illness in the financial industry, and the question is whether this is simply a bad infection, illiquidity, or whether this is gangrene, insolvency.
I would argue for the latter, and with advanced gangrene the only option is to amputate.
So, how can you amputate, when the finance industry is essential to the functioning of the rest of the economy?
The answer is that it’s not essential. Reasonable access to credit that is essential.
The question is not how to preserve Wall Street, it is how to make sure that businesses on Main Street can continue to operate.
The numbers to do this are actually relatively small, GM and Chrysler got $18 billion to continue to operate, which is a drop in the bucket compared to the more than 8½* trillion that has been allocated to the finance industry.
Even just using the $350 billion remaining in the TARP to set up a lending facility for small and medium businesses would go a long way.
In fact, it would go much farther than throwing more money at the Wall Street.
You could recruit a workforce quickly from the hundreds of thousands of rank and file financial professionals who have been laid off in 2008.†
This would have the effect of providing the grease to ease the wheels of the economy, without enormous expense of supporting what are walking dead zombie institutions.
Obviously, you would not want this as a permanent solution, but our economy is more like an octopus than a person, and so lost limbs regenerate over time, so if one were to add a small surcharge, which would render this facility irrelevant and unnecessary once a new finance industry, springs from real market needs.
Footnotes:
* Economic rescue could cost $8.5 trillion
† Layoffs in U.S. up 59% from 2007
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