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wowsers. people still questioning if the bailout would have prevented collapse.
The banking system runs on credit. The credit markets allow banks to loan to each other & keep the system liquid.
When the banks had massive exposure to derivatives traded in dark markets, nobody knew what risk the banks were carrying. As a result, the credit market froze, as no bank could trust one another that they would exist much longer.
all of the publics liquid assets like checking & savings accounts. Some of this money is held in reserve. Some is guaranteed by the FDIC. However neither of these safeguards have anywhere near sufficient capital to deal with a frozen credit market.
additionally, most large corporations utilize large pools of credit to main inventories, pay employees, hedge energy costs etc.
If the credit market ceases to function, most of the functions of the banking system, & all businesses dependent on credit, simply stop functioning. There is not nearly enough cash in reserve to meet the needs of the economy in absence of credit.
When credit transactions stop, & banks are no longer able to pay out cash on the numbers in peoples bank accounts, panic will ensue. Only people who hold cash & guns will be able to participate in the economy. So drug dealers will do very well.
The people that control the printing press are the only people that could solve the problem. Thats exactly what they did, before time allowed the calamity to unfold.
bottom line is that there is no alternate explanation as to what would happen in absence of the bailouts, because the bailouts were the only thing that could be done, short of returning to the 19th century in 2 -3 months.
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