Re Karl Denninger, in general I find much to agree with, specifically his focus on excessive leverage, lack of transparency, and lack of adequate regulation. In his white paper on the mortgage mess, he even called the whole thing a Ponzi scheme, so how could I help put like it!
Unfortunately, I do think he misses the boat wrt to trying to correct things. His solution is the long term one, fix the above three issues. That is not the problem we are dealing with right now, although I think those changes need to be taken now as well.
Its kind of like an emergency room doc deciding he will treat the heart attack victim by having the dude change his lifestyle, starting right now. Fine, he most likely does need to change his lifestyle, but a better diet and more exercise is not the current solution.
He does somewhat note this problem himself, but then glosses it over.
This will in turn require capital raising activities to be instituted immediately on a scale far beyond what has been seen to date, and would likely result in the equity price of the investment and major commercial banks declining by as much as 80% due to the massive dilution that would be involved in such actions.
However, raising capital through this process would lead to a stable economic outcome and remove the risk of systemic failure.
A bit astonishing IMO. |
