Credit
U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” according to said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.
“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said in Dubai, yesterday. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”
Well, maybe Roubini is right; certainly, with the credit crunch, there is evidence that the banks are out of funds.
The U.S. runs on credit. Real estate (subprime or not) is bought on credit. Major U.S. corporations run on credit. American’s individually run on credit – cards…
Cash
Mexico is a country that runs on cash. Most Mexicans own their homes, which is why most Mexican homes are more modest that American homes, which are owned, in the main, by banks. For that reason, Mexico looks a lot poorer than the U.S.
Looks can be deceiving.
When a Mexican loses his job, chances are he will not lose his house – or his car, for that matter. The unemployed Mexican has a much better chance of decent survival than does an unemployed American.
Now that the U.S. banks are flat broke, or worse, under water, what are the Americans to do? Can Obama pump enough cash into the banks to bring them back to life? So far, the bailouts have served only to guarantee the enormous salaries and bonuses given to those who (mis)manage our money.
Will the bailout work? So far it hasn’t. Maybe there is a lesson for Americans in the Mexican way of life – cash is king – olé
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