Monday, 23 June 2014
Prof Kevin Dowd’s bizarre solution for failed banks.
I’ve just stumbled across a truly idiotic proposed solution for failing banks suggested by Prof Kevin Dowd (in a letter to the Sunday Telegraph in 2009). His big idea is to put banks through the normal receivership process that other businesses go through when they’re bust. And that includes forcing all bank creditors (including ordinary depositors) to take a hair cut.
Spotted the flaw? If not, think back to what happened when the “Dowd” solution was suggested for Cypriot banks a year or so ago. Does the phrase “riots in the streets” ring any bells?
Or if there weren’t riots, then at the very least, the politicians implementing the Dowd “Cyprus” solution would be guaranteed to be voted out of office come the next election. And politicians, clueless as they are on the subject of banking, normally have a good idea as to what might get them booted out at the next election.
So the blunt reality is that incumbent politicians just won’t go for the Dowd solution. Full Stop. Period. End of argument.
Moreover, there is a very good justification for any riots or other violent reaction from the common people that would result from the Dowd solution: it’s that having a totally safe method of storing one’s money is a basic human right, isn't it?
P.S. (same day): I don't normally respond to LETTERS in this blog. However Prof Dowd listed the above as an "article" in his CV here.
That's why I took an interest in it. And while I'm on this topic I'd just like to mention that I've had about 200 - er - "articles" published in newspapers. However, being of retirement age, I don't see much point in adding them to my CV.