Bailout-related question of the day
September 28, 2008 – 5:47 pm by JohnWho said this, and in what year? First right answer wins you a free beer (if no one guesses the year, the closest one wins). No cheating!
Public opinion is perfectly right to see the end of the boom and the crisis as a consequence of the policy of the banks. The banks could undoubtedly have delayed the unfavorable developments for some further time. They could have continued their policy of credit expansion for a while. But—as we have already seen—they could not have persisted in it indefinitely without risking the complete collapse of the monetary system. The boom brought about by the banks’ policy of extending credit must necessarily end sooner or later. Unless they are willing to let their policy completely destroy the monetary and credit system, the banks themselves must cut it short before the catastrophe occurs. The longer the period of credit expansion and the longer the banks delay in changing their policy, the worse will be the consequences of the malinvestments and of the inordinate speculation characterizing the boom; and as a result the longer will be the period of depression and the more uncertain the date of recovery and return to normal economic activity.