Cyprus: Banks Should Go Bankrupt
Why is it that every other business in the world can go bankrupt except banks? Bankruptcy ensures that the assets are quickly put back into productive use and that we do not throw productive resources into unproductive (failed) enterprises). Bankruptcy ensures that market feedback mechanisms are preserved so that bad investments and bad management are not rewarded. Bankruptcy is not always bad and not all bankruptcies are the result of mistakes (or worse) on the part of investors or management. But even in these cases it is important to refocus people on new enterprises not having them hold on to failed enterprises. As the saying goes in business,
Never throw good money after bad
I would suggest that the reason politicians refuse to allow banks to go bankrupt is the close relationship between banks and governments. This relationship is fostered by central banks and legal tender laws. Because of these governments are at risk when big banks fail and it stunts their ability to steal from average people and give money to the politically connected. I suggest the following solution that would be good for the people, good for the economy, good for honest banking, but not necessarily for politicians:
1) Repeal the legal tender laws. They are unconstitutional, not part of a free market, and allow governments to counterfeit.
2) Eliminate central banks. Central banks distort the market and are the presently accepted way for governments to counterfeit money.
3) Never bailout banks: BANK’s SHOULD GO BANKRUPT just like every other business.
The solution for Cyprus is to allow their banks to go bankrupt and get on with business. This would be the best solution for people of Cyprus and their economy.
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