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  Leonard C. Tekaat says:

  We basically rely on the financial sector to know when enough credit creation is enough before the economy implodes. The financial sector doesn’t have the correct gages or the correct tools to prevent the economy from blowing up. The risk of losing the game is not enough to keep credit creation in check. Even when the banks did not have the government guarntees and the banks could lose everything, they blew the economy up in 1929. This tells you that risk is not a good control on credit creation. Regulation failed in the late 1960s and 1970s as showen by the high inflation rates of that period. We tried deregulation with the government guarantees in place and we ended up with another worldwide financial crisis. The banks will tell you that we are only providing what the people want. There in is the solution of controlling the excessive use of credit during the inflation cycle and when bubbles are being created.

  10^th of November, 2012