Bank in trouble are no more…it’s the tax payer that’s in trouble….especially in the UK and the US. The government has already said that they won’t allow any banks to fail…and unfortunately I believe them. Why unfortunately….? Let me explain.

Capitalism….that’s the system we’re supposed to have…it works like this. Companies are founded, grow, some go bust, other companies take over their productive assets, and the new company grows and the process starts again.

What we have right now is this. Banks are founded, they do stupid stuff, they get bailed out by tax payers, they learn nothing, they probably do more stupid stuff, good banks can’t get their assets and the good banks can’t grow as they should be able to and are not rewarded for doing good stuff…all the time the stupid banks don’t get punished for doing bad stuff. This removes the incentives for good banks to do good stuff and also removes risk from bad banks of being, well, bad…and stupid…and risky.

There is another country where this model operates and has operated for some considerable time….it’s called China.

In China, companies are there to provide jobs for the states workers. Most are run with the considerable help and influence of the state. They have loans that are never repaid and waste is everywhere. The upshot of not having capital allocated according to, well, let’s call a spade a spade, Darwinian principles of competitiveness, is that the standard of living of the entire country suffers.

Yup…people in China are mostly poor, unskilled, in slave-like conditions and with virtually no freedoms. It has to be this way over a long period since the capital that could be allocated to make them all better off is wasted on unproductive ventures that doesn’t add to the country’s GDP as much as it would if the market was allowed a more free hand.

There’s are reason we call someone who is out of date and out of touch a “dinosaur”….they should be extinct and probably soon will be. It’s a pity we can’t apply this simple lesson to half the banking system. Banks have been going bust for hundreds of years…why should it be any different this time?

Welcome to ChEngland. No banks in trouble.