I enjoy reading Paul Krugman’s writing. I appreciate a Nobel Prize winner who is able to communicate vital, complex ideas in a straight forward, understandable way.
In his recent column “Wall Street Voodoo” Krugman seems worried that influential people are leaning toward a Frankenstein’s Monster of bank crisis solutions that will sink further tax payer billions into what he calls Zombie Banks; banks that are essentially already collapsed yet through bailout money and the expectations of further bailouts are able to continue – likely for strictly their own purposes – to pose as fully functioning entities.
But recent news reports suggest that many influential people, including Federal Reserve officials, bank regulators, and, possibly, members of the incoming Obama administration, have become devotees of a new kind of voodoo: the belief that by performing elaborate financial rituals we can keep dead banks walking.
Krugman is suggesting a temporary nationalization of the troubled banks but fears that irrational ideological opposition to nationalization and a disinclination to recognize unpleasant realities will lead the big thinkers to engage in The New Voodoo Economics.
Why go through these contortions? The answer seems to be that Washington remains deathly afraid of the N-word — nationalization. The truth is that Gothamgroup and its sister institutions are already wards of the state, utterly dependent on taxpayer support; but nobody wants to recognize that fact and implement the obvious solution: an explicit, though temporary, government takeover. Hence the popularity of the new voodoo, which claims, as I said, that elaborate financial rituals can reanimate dead banks.
Knowing they are safely ensconced within the concrete towers of the worlds biggest Welfare Scam and that the American Taxpayer is there to cushion the fall.
Besides his regular NYT column, Paul Krugman also writes a very interesting blog called The Conscience of a Liberal.