So they have a banking crisis. So what? It hasn't material consequence. Did our banking crisis have material consequence? A lot of people whined and complained about how the issue was going to destroy us. I told them then, early '90s, that they didn't know what they were talking about. The academics, the politicians, Wall Streeters, Seidman, the RF, they all thought that was such a big problem. They also thought that the budget deficit caused interest rates to rise and they thought that even after years of rising deficits and falling rates. What is more you can't say that the FED did it in that the money supply hardly grew. Yet year after bloody year you had these experts come out and make all sort of fool claims that had absolutely no logic to them. Now, all of that whining truth is no longer operational.
I don't see why it is so difficult to see that a non-performing loan has little consequence. If a bank just stops recognizing that it exists, solves the problem. Their accountant has to adjust implied capital, but the bank has carried this non-performing asset for years and has de facto adjusted to the non-receipt of interest, So please tell me how any of that has any consequence? It has a little consequence if the stock market decides to rediscount this information in the bank's shares. Lots of smart guys have told me for 30 years that the stock market rarely, if ever, discounts something twice. I don't agree. I believe the stock market accounts for the past. In any event the implied effect is already in asset evaluation in every form. The banks just admit to the fact that they aren't going to get what they thought they might. To believe that that status of affairs confounds transactions, the delivery of goods and services, or the accurate evaluation of the worth of things, is mistaken. |
