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10-12-2016, 05:08 PM
(This post was last modified: 10-12-2016, 05:23 PM by CY09.
Edit Reason: edits
)
In a free economy, a company will collapse and be liquidated; wiping out equity holders while bondholders only recover a portion of debt.
In the real world, the state intervenes and tries to prevent its major companies from winding up, in the process increasing the national debt. we have seen this in many countries: US, UK, China and now possibly, Italy. If every country goes down this path of protecting their large companies and racking up national debt, it is going to be an economic "war" of which country has bigger financial muscles.
IMO, the next crisis wont be a collapse of banks, but the financial collapse of a country who tried to save its companies suffering from overcapacity and mismanagement.
In the real world, the state intervenes and tries to prevent its major companies from winding up, in the process increasing the national debt. we have seen this in many countries: US, UK, China and now possibly, Italy. If every country goes down this path of protecting their large companies and racking up national debt, it is going to be an economic "war" of which country has bigger financial muscles.
IMO, the next crisis wont be a collapse of banks, but the financial collapse of a country who tried to save its companies suffering from overcapacity and mismanagement.