Banking union and rearranging the deck chairs

One of the ways being proposed to deal with the European part of the economic crisis is  centralized banking supervision.  More on that in this article in this week’s Economist.

The question here is would a banking union solve the problem.

Back when Russia was trying central planning and having problems, some people figured the solution was decentralized central planning.  Banking union  sounds like the reverse thinking. It also sounds like rearranging the deck chairs.

If the basic problems is the people or institutions or governments to whom the banks have loaned money are unable to repay those debts then centralization will not work because it will do nothing to reduce or repay the debt.

I think the financial side of the current economic crisis is rooted in the way we create money.  For more on this please see the essay on this  weblog titled “LETS go to market: Dealing with the economic crisis.”

 

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