Big Banks: Curse or Cure for the Global Economy

One of the sessions at this year's Davos conference is titled Big Banks:  Curse or Cure for the Global Economy?

Regular readers know that banks are the cure for the global economy because they have the ability to act as a safety valve between the excesses of the financial markets and the real economy.  Specifically, they can absorb the losses on the financial excesses.

Having the banks absorb the losses on the financial excesses spares the real economy from both carrying a debt load it cannot afford and supporting "zombie" banks.  Instead, having the banks absorb the losses allows the real economy to continue to grow.

As for the banks, they can return to their traditional role of supporting the real economy.  Even though they will have significant negative book capital, they can still provide both payment services and access to loans.  Over time, the banks will recapitalize themselves through retained earnings and equity issuance.

It is certainly nice to see a central element of your humble blogger's blueprint for saving the financial system is a topic of discussion at Davos.

Having "written the book" on how banks are the cure for the global economy, I expect to hear from the session's participants.