Thursday, January 29, 2009
From Davos, Switzerland, Nouriel Roubini and Robert Shiller were on Bloomberg this morning talking about the outlook for the U.S. banking system and the global economy.
After reiterating his view that most of the U.S. banking system is insolvent, Nouriel suggests we proceed directly to nationalizing what's left and Shiller mostly agrees.
Then an ambulance goes by and Bloomberg's Erik Schatzker wonders whether that's another bank being taken the hospital (that's the still you see above - both having a good gallows humor chuckle).
What's kind of remarkable about this interview is that Roubini and Shiller, both early seeers of the financial troubles we are now in the midst of, think that we should be able to just fix the banks, stop the foreclosures, provide even more massive stimulus, and then carry on with basically the same system in place.
Shiller says, "the fundamental problem is, unless we restore confidence, we're going to be in a situation where, when you stop the fiscal stimulus, we come right back down."
But, what if you can't restore confidence in the current system?
It's as if it doesn't really matter that the most massive financial bubble in the history of the world has just met its pin. Instead of rethinking what got us to this point and whether now would be a good time to reexamine the bigger picture (e.g., the nature of our monetary and credit system, what passes for "sound economic" growth, etc.), it's all about bigger shovels to extricate ourselves from another huge hole we've dug.
Amazing ... a form of cognitive dissonance for even the smartest economists.
Here's a related article and the video summary is below:
00:00 Roubini: most U.S. banks "insolvent," losses
00:58 Roubini: nationalization, "near depression"
01:28 Shiller: credit market, favors "Bridge Banks"
03:06 Shiller, Roubini: U.S. economic policy, risks
04:31 Shiller: banking regulation, agency control
05:31 Roubini: cooperation on regulation, change
06:37 Roubini, Shiller: Obama administration's plan
08:16 Shiller, Roubini: Fed experiments, U.S. banks