OldLimey

Bernanke Edges Closer To the 'Real' Root Cause Of the Crisis

"As in all past crises, at the root of the problem is a loss of confidence by investors and the public in the strength of key financial institutions and markets."

I hope this is just Bernanke-spin, because if he genuinely believes it we are truly stuffed. The evidence of the last week does, regretably, seem to be that governments want to rebuild the collapsing financial and economic edifice on the same cracked foundations. In the UK, Brown wants banks to return to 2007 levels of lending - without thought about to whom, for what, or the borrowers' capacity to take on more debt. In Australia, Rudd is handing A$10 billion directly to targeted recipients with the explicitly-stated objective of getting the money directly to the types of consumer who will go out and spend it in the runup to Christmas. In the US, the next Congress will doubtless produce the mother-of-all-stimulus...

The Anglo-Saxon financial and economic model of debt-fuelled binge-spending is broken. If and when signs of a new model begin emerging, ideally one which has consumers doing some saving and bankers doing much less financial 'engineering', then at that point a return of confidence might be justified.