During the 2008-09 financial crisis, central banks and sovereign nations came together to bail out the private sector and restore confidence to the markets. While that did little for Main Street, the moves did save the global banking and financial system … for a time.
Now that the sovereign debt crisis is accelerating and countries like Italy and Spain appear to be too big to bail out and the U.S. is dealing with the aftermath of the S&P downgrade, the question is who will come to the rescue? Or as Minyanville.com founder and CEO Todd Harrison has been asking for more than two years, who will save the lifeguards when they start drowning?
It's a great question. Unfortunately, there are no easy answers. In the accompanying video, Harrison and The Daily Ticker's Aaron Task discuss the potential solutions. As Aaron points out there are only a few entities with enough money and muscle to bail out the system -- China and Warren Buffett come to mind -- but Harrison isn't holding his breath.
The truth is there's no magic bullet. "Ultimately, we're going to need to take our medicine," says Harrison. "The medicine is debt destruction or restructuring on a grand scale." Furthermore, the global economy needs something it's been sorely lacking -- political leadership. "This is going to take time, this is going to take patience, and this is going to take proactive problem solvers to get through this."
If we don't find that somewhere, Harrison argues we're in for social strife and a move from globalism to isolationism.
- Warren Buffett
- central banks
- The medicine