BoE's King: Euro-area debt crisis has 'no end in sight'

As reported by Bloomberg, the Bank of England's Mervyn King observed that the Euro-area debt crisis has 'no end in sight'.

Regular readers are not surprised by this because it is a direct result of the choice by policymakers and financial regulators to pursue the Japanese model for handling a bank solvency led financial crisis.  Under the Japanese model, bank book capital levels and banker bonuses are protected at all costs.

By shifting the burden of the excess debt in the financial system onto the real economy, the Japanese model insures that capital that is needed for growing the real economy is diverted to debt service.  The result in Japan has been 2+ decades of limited economic growth.

There was and still is no reason to believe that the EU, UK or US will fair differently under the Japanese model.