Forbes
Mar. 6 2011
By JOHN TAMNY
Image via Wikipedia
The bank bailouts of 2008 continue to bring the broad economy harm, all the while restraining the ability of the banking system to get back on its feet. This shouldn’t surprise anyone.
To put it simply, while business failure of any kind is always painful for investors and employees alike, it’s a happy sign of economic revival for revealing in living color that capitalism is working. Business failure hardly constitutes business disappearance, and the beauty of failure is that it ensures that poorly managed assets are released at frequently low prices to managers with a stated objective to develop those human, mechanical and financial inputs more effectively on the way to growth.
To make basic what already is, failure signals an economy on the mend simply because the bad business ideas, investments and labor misuses are cleansed from the economy. Failure means that bad ideas won’t be perpetuated, that an ineffective status quo won’t be maintained, and that’s why Silicon Valley’s rather ruthless approach to failed concepts means that it thrives, while Michigan languishes for propping up concepts that rational investors and workers long ago left behind as yesterday’s news.
Looking at banking itself, bailouts and the presumption of same hardly enhance the industry’s health; instead too many marginal producers are allowed to stay in the game and destroy capital thanks to a government willing to cushion their every mistake (think Citigroup). In a banking system characterized by the freedom to fail, we’d have long ago rid ourselves of Citi and myriad other financial institutions, and their bankruptcies would have coincided with enhanced market share for the successful in our midst such as Frost Bank (having avoided risky banking practices, the San Antonio-based bank refursed TARP funds), not to mention that the successful would be overseeing the very capital that the ineffective continue to deploy unwisely.
Read the entire article
No comments:
Post a Comment