Quote Originally Posted by Chi View Post
If the banks failed America would fail. Banks fund, small business, large business, government, households - everything.

Individuals/corporations would be borrowing from overseas (and even moving overseas 100x quicker than they are now - which means loss of jobs as well) which means cash-flow will be flowing out of the US constantly (good for other countries, terrible for the US). I'm not 100% how the economics works but it would significantly effect your $ and it would mean households would suffer greatly. Its not a pretty picture imo.
You make it sound like every single bank failed. It didn't. There were plenty of huge banks that didn't need bailouts(NOTa bridge loan.)
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First, if banks were making loans that did not get paid back, then they were not doing their primary job which is to make good credit decisions. Bad credit decisions should be punished, and the owners and operators of such companies should be fired and/or wiped out. This is how markets work. Rewarding such behavior only encourages more bad practices in the future, and people (rightly) start to wonder why we have a financial system at all.

Second, if banks fail, that contraction in private financial asset growth can be balanced by “capitalizing” the rest of the non-Governmental sector directly (through some combination of tax cuts and spending increases — whatever increases the deficit). Since economists at Harvard and Princeton do not understand that the Government is the sole creator of net financial assets (equity) for the private sector, they do not know that this policy lever is on the table. So we are where we are.”

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