IDEOLOGY MUST GIVE way to pragmatism. Around the world, the role of the state in financial and banking markets is set to grow and the private financial services industry will shrink. Let’s just get used to it. The programme of emergency bail-outs and nationalizations will roll on for some time.
There is a basic requirement for money to move from buyers to sellers, employers to employees, savers to borrowers. Where that system is fundamentally threatened, the state must always be ready to step in. In an absolute extreme, when no other credit is deemed trustworthy to lend to, it must not just support but effectively replace the financial system.
We are not there yet.
In the US, home of free market capitalism, the debate will be long and loud over the coming months as the government seeks to sustain the financial system with public money.
The Resolution Trust...
