ravi wrote: > Okay, da Krug has me a bit stumped: > > Y'day on his NYT blog he wrote: > >> Nouriel Roubini has a characteristically scathing takedown of the Paulson >> plan, and here's the thing: language aside, his economic analysis is similar >> to mine. The fundamental problem in the financial system is too little >> capital; > > But, IIRC, at the outset of this $700b mess, he wrote that the Fed's logic > is flawed because they assume that the problem is the lack of liquidity. > Rather, da Krug felt, the problem was lack of trust. Everyone, including the > very scheming bankers under suspicion, was unwilling to take the money out > of the mattress and put it elsewhere. > > Is that true from your recollection, or am I reading da Krug wrong?
I don't keep track of everything that PK says, so I can't say what exactly he's been saying. But there's no contradiction between a crisis due to "too little capital" and one due to "lack of trust." The value of a bank's capital (its equity) depends on how stock markets value it. (Bank capital is more than loan-loss reserves.) Lack of trust in banks encourages stock markets to lower their valuation of the banks' stock. -- Jim Devine / "Nobody told me there'd be days like these / Strange days indeed -- most peculiar, mama." -- JL. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
