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Mats Kaarbø


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Central Banking or Nationalized Banks?

In the aftermath of the bubble burst in '08, Iceland took a radically different path than the United States after their financial crisis and nationalized the banks, threw some people responsible for the crash in jail and bailed out the homeowners instead of worrying about only bailing out the banks. And now they're coming back and their economy is growing again... http://goo.gl/QuKGA

When the banks in Norway declined in 1992, the government simply nationalized them (instead of bailing them out leaving the tax payer to pay the bill) which gave the banking business a breather and was ultimately beneficial for its citizens, because the banking business returned to more traditional banking values, though it only was for a short period of time.

So, in terms of public prosperity is there any merit left to keep the current central banking system, with many private banks and one central bank, instead of nationalized banks?


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  • Nov 9 2012: Such decision depends mainly on one simple thing,which is the capacity of the economy to expand(which is something measurable) and how much money will the citizens needs to create new business(which isn't something directly measurable) . Considering these 2 factors.these 2 alternatives(Central banks or Nationalized banks) can be more or less convenient . Examples where one of these options are,for now,better than the other one are:

    - For developing countries and BRIC(with the exception of China),where the demand of financial resources has been becoming huge(both for large scale investiments and for small scale investiments),it's actually more interesting to incentivate competition between banks,so money becomes cheaper to borrow to consumer . The case of China here is special,as,historicaly,its government has been much more power and responsability for economic growth than others countries(such power and responsability existed way before PC rose to Chinese power in 1947) .

    - For a country where most of its structure is already lifted,there isn't so much demand for financial resources . With that,Speculation becomes much more dangerous to economy,since it's often,the only method for raising tons of money,differently from a "Developing country" . This is,often,the case of plenty of Western European countries .

    Possibly,there are more factors that are as much important as the factors already mentioned(infra-structure and capital demand) . In any case,factors are the only thing that can tell which decision is better . And such factors are largely different,depending on which country you are . As I like to say: "Panaceia is Placebo" .

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