The Obama Administration is said to be in talks to Nationalize several large
U.S. Banks, or at least increase their stake in some of them (such as Citi).

We here at the Global Affairs Council have wondered with growing unease for some time at the Government’s intentions in this area.

Hopefully I don’t need to go into a discussion of why the Nationalization of banks is a terrible thing. We’ve commented in the past that the Government is not equipped to run a bank and would only make matters worse. Many government officials probably couldn’t even get an interview for an entry level job at a large bank, let alone run one.

Why, we wonder, doesn’t the Government simply create several new banks and loan all that money to them?

The old banks have failed, we should let them die.

The only reason we can’t do that is because of the risk of contagion and the further tightening of the credit markets due to fear of other banks collapsing.

But! If the government created several new banks (and by “created” I mean grant charters to independent private individuals not affiliated with the government in any way) and then loaned all those billions to them, there would be complete transparency. We, as investors, would KNOW that those new banks don’t have any toxic assets that could potentially wipe them out.

That would completely remove the fear that would have lead to contagion.

Investors would feel comfortable investing in these safe new banks, businesses would feel safe conducting business with these safe new banks, and the public would feel comfortable keeping their savings in these safe new banks.

The major banks have failed. Criminally failed. Banking is an incredibly easy business. You take in deposits, you save a percentage of those deposits and loan the remaining amount out, and your profits are the difference between the interest rate that you pay the depositors and the interest rate you charge the people whom you make loans to. Easy.

The fact that these major banks have screwed up something that is so fundamentally easy is all the proof we need that they should be allowed to fail. Remember the old view of the stodgy banker closing shop at three in the afternoon and playing lots of golf? There’s a reason that stereotype used to exist…because banking is a sleepy, easy profession.

Let’s stop trying to rescue banks that can’t be rescued, and SHOULDN’T be rescued. Lets let some new blood into the system and put this madness behind us.

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Russia’s attack on Georgia signals a shift in the balance of power within the region and perhaps throughout the world that will have significant implications on all of Europe as well as the United States and China.

BACKGROUND:

On August 7th, 2008 troops from the Republic of Georgia invaded territory held by South Ossetia, a breakaway region of Georgia that had declared its independence back in the early 1990’s. That independence had not been diplomatically acknowledged by the United Nations, who still saw South Ossetia as a part of Georgia.

On August 8th, Russian troops entered South Ossetia, citing a kind of informal alliance between the two “countries”. By August 10th, Russia had secured their position in South Ossetia and begin to eyeball Georgia proper, which they then invaded the next day.

ANALYSIS:

This raises several obvious questions to us here at the Global Affairs Council. Why did Georgia invade South Ossetia in the first place? How was Russia able to react so quickly and effectively? Did Russia lure Georgia in so that the could use the “invasion” as a pretext to invade themselves? Why did this happen now, when the eyes of the world are turned to the Olympics in Beijing? Will the United States react, or will they be unable to stop Russia?

Bogged down with the wars in Afghanistan and Iraq, contemplating another action in Iran, and facing a Presidential election that will soon sweep the current administration out of office, the United States is seemingly overdrawn and unable to answer the situation in Georgia.

This action seems to re-establish Russia’s military might after its crushing defeat during the fall of the former Soviet Union and is seen as an attempt to re-establish Russia’s sphere of influence and signal to the world a comeback of Russian power under the rule of Vladimir Putin.

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