Yves here. Many commentators have pointed out how the US bank-friendly resolution to the financial crisis set in motion many festering problems that have become more acute over time. One biggie (along with not punishing bank executives), was refusing to haircut or meaningfully restructure bad debt, and then using ample fiscal spending to offset the contractionary impact of big credit losses. Making lenders bear the cost of poor decisions would also help set the foundation for more prudence going forward.

Instead, as readers know too well, we had a decade plus of sub-par growth even with super low interest rates, which did more to goose speculation than economic activity. As Jomo points out below, the one trick pony of the Fed sees every inflation as the result of too much demand and sets out to whack that with interest rate increases. But as Jomo stresses, this is a poor approach

Keep reading this article on Naked Capitalism (Yves Smith) - Blog.

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