Paul Krugman probably knows as much about the financial crisis as Anyone, and the Reader should preview this article; but why can’t he develop a proper table? The six rationales are an easy fix: Size is simple–just create a business tax which penalizes excessive size. Shadow banking is also simple–just nominate a Commission who can declare businesses banks anytime they wish; hell, some criteria might even be defined. Opacity may be the easiest–the IRS allows to declare anything Null and Void without Tax exemptions if it cannot be easily understood, and taxed to the maximum. Predation–allow Bankruptcy Courts to order the return of any and all financial charges made on financial instruments the Judge finds difficult to understand. Government intervention perhaps could be forestalled by a uniform system of regulation. Monetary mismanagement could best be handled by Congress by setting adequate fixed rates on Credit; pin down Consumer Lending, and you pin down all following Wildcatting in the financial markets. A lot of Readers will think I find this entire Situation rather simple, which I do not! What I am trying to say is that any Solution must be clear, clean, universal in application, and stand the test of Time. The concept of a Quick Fix must be left behind, and a permanent change of direction envisioned, else We will always be back to the temporary gaps which must be financed by Government intervention.
It might help to read this thing, or it might not. My first opinion on it must be that there could be a definition by Congress on what constitutes Investment, and what constitutes Gambling; all with the Intent to tax Gambling at a higher rate than Investment. That definition should be based upon the security of funds within the transaction. What I mean is does the fulfillment of the contracted obligations itself guarantee reimbursement of the Principal? If it does not, then Congress should declare it Gambling. Congress could set aside the funds drawn from the excess Tax revenues as a fund to reimburse the Principal on financial instruments which fail due to partner noncompliance.
I will throw in this Post so that everyone can feel bad at the beginning of the Week; it is about as bad as the volcano. Maybe a Earthquake would be more educative, as Consumer Sentiment seems to be suffering from liquefaction. There is not much hope that things will get better for the households in the near future, and it seems that it will require an alteration in the Goods model before it occurs. The trouble with studying any type of continuous system operation is the feeling of being a wounded animal, as the systems habitually sour in operation. Depressing, isn’t it? lgl