Now that monetary theories have morphed into a Frankensteinian beast that is stalking its creators and the world economy, there is a growing chorus of voices calling for governments to step in with fiscal and structural reforms to fix the mess.
The trouble is that the changes needed are not more of the same tinkering at the edges: adding more debt and even more government guarantees of private risk. Rather the reforms needed are substantive: things like tax code changes that no longer incent debt-financing; that cap the use of stock-options in executive pay, that end share-buybacks (they were considered illegal market manipulation up to 1982); that increase pay equality and opportunity to spread wealth to a greater number of people; that end tax-loopholes, reduce subsidies, level the playing field and use anti-trust rules to break up too big to fail conglomerates while holding individual actors responsible for directing corporate crimes. When you come to the end of the road, it’s time to go in a different direction. We are there.
“Morning Must Read,” Bloomberg’s Tom Keene highlights comments on the inability to repay public and private debt. He speaks with Yale University Professor Stephen Roach on “Bloomberg Surveillance. “Many debts both public and private, simply cannot be repaid.” Here is a direct video link.
Yale University Professor Stephen Roach discusses the challenges facing the global banking industry. Here is a direct video link.