The IMF has warned that potential losses from the credit crunch could reach $4 trillion and damage the financial system for years to come. It says that even if urgent action is taken to clean up the banking system, the process will be “slow and painful”, delaying economic recovery. It says that banks may need $1.7 trillion in additional capital.
These numbers shouldn’t be too surprising since last November Gordon Brown was admitting to a number of $ 2 – 3 Trillion. But they will be to some. And for most of us they will be meaningless. But the number is a BIG number.
Unfortunately the biggest problem remains not one of capital but one of moral hazard. There seems to be little being done about innovating systematic change in our economic systems, in changing our consumption decisions and our commercial outlook.
While cash injections might reliquify economies, they will not heal the systemic dysfunction. Let’s see less bailing out individuals and more creativity in enlightening the measurement of prosperity, opening up economies and innovating for natural interdependence.
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