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John Hussman: Applying Ockham's Razor to the Current Crisis [View article]
The other HALF that was forgotten was MARKET-MARKET accounting. Put yourself in the banks shoes. Why in the world would you loan out capital when you may need to market your assets down and need the very capital you just loaned out? You wouldn't and neither will the banks.
Moreover, if its hard enough to know whats on your books there is no way in the world your going to trust whats on another banks books. Hence, no lending.
If we had MARKET-MARKET accounting in the early 90's with the S & L
crisis not a single bank would have survived.How much capital has to be destroyed before someone somewhere realizes to either take a time out or eliminate MARKET-MARKET.