Imagine this: A world without...private banking!? What looked absurd in the Western World, the Anglo-Saxon part of it in particular, just a short time ago, now is whispered between the lines of even some of the most venerable pro-market papers. In the face of recurring cataclysmic losses, seemingly never-ending exposure to 'toxic assets', we may have to start thinking the unthinkable: The N-word. Nationalize. - No, not your average nationalization of sorts – a few buying stakes here and there. That ain't doing the trick, no more. I'm talking about something much much bigger: The (temporary) nationalization of entire national banking systems – the UK and the U.S. being first in line - to save global finance, and therefore the global economy, from being buried alive under the weight of all those CDO, ABS, CDS, etc. etc.
For without functioning national banking systems – and it's hard to overlook the fact that despite all efforts by many governments as well as central banks that to date, financial markets still find themselves stuck in crisis-mode -, the global economy is and will be mired in a recession that seems to be growing deeper daily. One already discernible effect of these dire straits: The role of the state is growing almost by the day, accompanied by an ever-more hefty burden of public expenditure financed entirely by...public debt. So we find ourselves caught in a paradox: While it was irresponsible lending to people who really couldn't afford borrowing so much money which lay at the root of so many of today's economic and financial worries in the first place, quite a few governments now try to spend their way out of the economic mess, piling up debt upon debt upon debt.
Would a wholesale nationalization of, say, the UK banking system dissolve this inherent contradiction? Certainly not. Would it somehow erase public debt? Of course not. Still, policy-makers may very soon conclude that no matter what they do, whether they save a bank or two, or even three, guarantee loans, help struggling companies against the credit crunch, start spending heavily on public works projects, proves to be futile as private banking just can't escape the booby-trap it has built for itself during the last decade of financial extravaganza. In this case, then, only the dreaded N-beast may present an opportunity to reboot the system, and start anew.
Sounds far-fetched to you? Even scary? So it did to me till recently. In a way, it still does. But maybe the dreaded N-beast just won't go away, yelling at us: End it, don't mend it! – at least till you can work, spend, and grow without me.
And what if we just say the other N-word: No? Well, the N-beast would tell us, in its cruel manner: Fine with me. I'll leave you alone. Meet my dear brother from Taxpayer's Nightmare on Elm Street: 'Bad Bank'.
The author is a former journalist and current legislative assistant. The opinions expressed in this article are solely his.
Related materials from the Atlantic Community:
- Scott Edward Hartley: Political Liberalism At the Heart of International Trade
- Yam Ki Chan: Unipolarity's Days Are Numbered
- Sonja Bonin: The First Big Book on the Credit Crunch
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