Japan had (has?) their zombie banks and their 20 year stagnant economy. We in the US (and world?) are going down the exact same road. It’s because politicians and banks are trying to save face, basically. They made some stupid decisions (from congress, like demanding banks lend to unworthy ‘subprime’ people; and banks, creating the whole CDS and derivatives fiasco) and now they are trying to plow forward and ignore the stupid decisions. The proper thing to do would be to admit failure, take your medicine and restart back with what was working before.
Instead, we are going to slog through all the crap that is required to cover up the stupid decisions and pretend like it’s all water under the bridge and we have to ‘just move forward’. What SHOULD have happened is that the stupid decision makers should have gone out of business and went back to flipping burgers for minimum wage — but instead we funnel money to them from future taxpayer donations and keep them in power. Lovely. Unfortunately, it can’t happen any other way – we are doomed to go down the same road as Japan and maybe worse – all because people want to appear to be smarter than they really are and save face.
“Those that fail to learn from history, are doomed to repeat it.”
? George Santayana
http://pragcap.com/zombie-banks-turning-japanese