Reply #59: The Finance-Government Complex & The End of U.S. Economic Dominance [View All]

[Demeter]

http://www.wilmott.com/blogs/satyajitdas/index.cfm/2009/5/26/The-FinanceGovernment-Complex--The-End-of-US-Economic-Dominance


Banks remain in the ICU (intensive care unit). Even after around $900 billion in new capital, the global banking system remains short of capital by around $1-2 trillion. This translates into an effective reduction in available credit of around 20-30% from previous levels.

Recent excitement about the "stress tests" of U.S. banks misses an essential point. At best if you accept the premises of the test, the risk of failure of these institutions is much reduced. But the banks’ ability to support lending levels that prevailed in say 2007 has not been restored. In short, the "credit crunch" or shortage of borrowing will continue for a prolonged period....