"Were setting ourselves up for a big catastrophe..."(economy)

[katty]

more: http://www.huffingtonpost.com/2010/01/07/simon-johnson-the-financi_n_414662.html

Simon Johnson, the MIT professor and economist who's long been a strident critic of "too big to fail" institutions, appeared on CNBC this morning and predicted that the next phase of the financial crisis could be precipitated by banks exploiting emerging markets like China.

"We now have a financial system that is completely based on moral hazard," Johnson said. "Crazy things happen when you have a financial system like that."

Johnson rebutted the recent sunny predictions of new Bank Of America CEO Brian Moniyhan, who said the bank's economists are predicting U.S. GDP will grow at a 3 percent pace next year.

Here's Johnson:

"The conventional wisdom is you can't have back-to-back major financial crises. I think we're going to push that, we're going to have a look and see whether that's true. And the next 12 months could really be exciting. People could be very positive, but we are setting ourselves up for an enormous catastrophe."
The emerging markets are the next phase of the crisis, Johnson predicted, as large banks look to unload risk on frothy foreign investments. The banks' risk-taking, Johnson argues, is fueled by their belief that the government has shown it will bail out huge financial institutions.

Here's more from Johnson:

[dkf]

1. Well we better figure out how to dismantle large institutions fast then.

Problem is everyone holds everyone else's debt. It's a house of cards.

[debbierlus]

2. I saw his interview earlier on cable - it was sobering

[Goldstein1984]

3. Now that they've sucked the last bit of juice from this bug

expect banksters and corporations to divest from the U.S. and look for prey elsewhere.

Does anybody really believe that corporate America has any commitment to this nation beyond that required to suck profit from it. Is there any doubt that the economic elite would be equally comfortable in a gated community anywhere in the world?

[madrchsod]

4. no doubt ....as long as they can hire mercenaries to protect them...

[Goldstein1984]

5. And that is reality.

It's Rollerball.

[jotsy]

9. that's the most truth I've read in a single comment here today!

I've been saying for awhile that the economic elite see publics through out the planet as labor markets or consumer bases, and I find it a little unnerving if we in the US are neither.

[Vidar]

6. Break 'em up! Recommended.

[nightrain]

7. divest yourselves from the robbers--close Chase, BOA, accounts--go local and small--credit unions

Take your money from them.

[katty]

8. yep-divest and more downsizing

[yurbud]

10. we have an economy designed for the benefit of spoiled trust fund babies at the expense of the rest

of us.