Such sums imply Govt. ownership until the taxpayer is made whole. I don’t think gifting trillions of dollars to banks like Citi or Bank of America without changing management and making a claim on turnover is either politically or indeed morally possible, and steps like those imply ownership, ie. nationalisation.

I know Prof. Johnson has turned every possible way to avoid nationalisation, but the fact is nobody has invented a way for the Govt. to recapitalise banks without owning them. Nor should anybody really try.

Its a WinWin since SS doesn’t have to mark to market, has a long time horizon and becomes closer to solvency with annual returns that are significant from their Citi bonds.

Other may see this is risky but as Gross says in for a nickel in for dime. We’re already all in with Citi since they cannot be allowed to fail due CDS concerns. We the taxpayer might as well make money on its final executions and resolution. If we keep the bondholder whole we might as well be the bond holder except we buy at a huge discount to maturity value.

“There is a great deal of point-missing in these paragraphs. Mr Krugman suggests that the way to avoid spending trillions helping the banks, and rewarding those who wrecked the banks, is to nationalise them. But nationalisation doesn’t make the debtholders go away. Would the government make them whole, or simply give them a minor haircut? If so, then you still have a situation where the government is spending trillions of dollars and rewarding people who don’t deserve a reward. Or would the government simply say, sorry debtholders, you’re stuck with the losses? That would save taxpayers a lot of money and strike a major blow against moral hazard—but only if it didn’t precipitate a Lehman Brothers-like meltdown.

If Mr Krugman hopes to convince me—and, I suspect, if he hopes to convince those with their fingers on policy levers—he needs to address this question. So far, he’s taken the easy way out, asserting that Ben Bernanke and Tim Geithner don’t get it, and are just too chicken to nationalise. “

Read this post from the Economist. As they say, there is a lot of point missing by Krugman on this risk – as compared to Martin Wolf.

http://www.economist.com/blogs/freeexchange/2009/03/bank_shots.cfm

I continue to feel that inflation is the better way to go.

Here is another post on that:

http://www.knowingandmaking.com/search?q=scott

If the fall of the Roman Empire teaches anything, the next battleground will not be oil or money but food supply. See “Quest for food security breeds neo-colonialists” in The Times (http://business.timesonline.co.uk/tol/business/columnists/article5846987.ece). No accident Michelle Obama is frequenting soup kitchens.

I think this speaks for itself.