THE PROBLEM is the cycle of overlending and then over reaction. Boom and bust.
Booms and busts have always been a part of life. But now they are coming more frequently and with more intensity.
This one could turn out not to be just Latin America, or just the oil patch, or just dot.coms, or housing.
This one is likely to be global.
In any event, these boom bust cycles are what destroys businesses and families, and towns and careers.
Can't really blame banks for doing what comes natural when market rates exceed cost of funds.
So then the question is, why are they becoming more pronounced?
Overly elastic money ... lending without saving.
Folks always wanting it NOW, and credit makes that possible. Cheap credit makes it almost foolish NOT TO.
The (post 1971 financial) system is responsible. There are no constraints on rampant lending.
No constraints on govt borrowing. And no constraints on central banks papering over the errors, at everyone's expense.
Its a one way bet for the banks. Lend and reap, fail and get bailed out.
If not by govts or central banks, then by depositors (next).
This is the message that has to get out.
These are the issues that need to be addressed in the next Wash, Rinse, Hang Out to Dry Cycle.
