June 08, 2012

It is of no use pouring water on a drowning plant

Sir, Samuel Brittan writes “You don´t need to be a lefty to support Krugman” June 8. Of course not! But, supporting aggressive government spending to remedy a recession produced by a crisis before eliminating the cause for it, is just throwing fairly good money after really bad. 

This crisis resulted from the imposition of capital requirements for banks which discriminated based on perceived risk, and created obese bank exposures to whatever was officially deemed as not risky and anorexic exposures to what is officially deemed as risky… and that discrimination is still in full effect.. especially when bank capital is more scarce than ever.