Distasteful Logic

The stock market bloodbath shows no sign of stopping as the global credit markets steadfastly refused to move. Even a synchronize cut by central banks around the world cannot move the Libor.

As panic set in globally, governments around the world are wondering what can be done to calm the markets. With real fears that the global economy is heading towards recession, Yamato Life Insurance Co in Japan filed for bankruptcy protection because of market turmoil. So much for any thoughts that Asia's financial sector is anymore stable compared with Europe and the U.S.

With such brutal losses across the board, the one thing I believe the Americans and EU governments must do is that they must forced their banks to start lending again. Nationalized the banks if you have to, but make those banks kick-start lending. That I believe is a way out of this mess. Governments has been slashing interest rates and throwing billions into the market to do this, but it is just not working.

Some of you might say that taking over the banks and forcing them to lend is a panic response, but I disagree. The equity bloodbath around the world is panic, nationalizing the banks and forcing them to lend is the most logical way calm the markets. Trading around the world were suspended for excessive losses at one time or another these past 2 weeks, and the reason is that people are not confident that the credit crisis is over. For people to regain confidence, the banks need to start lending again. If the banks are not willing to do so themselves, then I say governments must force them to do so.

I admit the idea is distasteful, but the idea is also logical and it’s a better bet than throwing endless money into the market. Desperate measures for desperate times.