The strategy of “buying time so the financial system can heal itself” by protecting a systemically destabilizing financial sector has failed because it could only fail.
The core strategy of central states and banks to fix the Global Financial Meltdown of 2008 was to buy time: take extraordinary emergency monetary and regulatory measures to save the parasitic too big to fail banking sector and the rest of the crony-capitalist Wall Street parasites, and initiate an unprecedented transfer of wealth from savers and Main Street to the banks and Wall Street via zero-interest rates and credit funneled to the very players who caused the crisis.
The idea was that the system would “heal itself” if authorities simply “bought time” by saving the financial sector from its own predation. The second phase of “buying time so the financial system can heal itself” was to institute policies (ZIRP, etc.) that restored the financial sector’s obscene profits and socialized its losses by transferring them to the taxpayers.
The terrible irony in the official strategy of “buying time so the financial system can heal itself” is the policies prohibit healing and guarantee the next financial crisis will be greater in magnitude than the last one.
There is only one way for any financial system to heal itself: enable the open market to discover the price of capital, credit, assets, collateral and risk. When participants finally discover the market price of their assets and collateral are much lower than the valuations claimed in credit bubbles, the market clears itself of bad credit and overvalued collateral in a market-clearing event in which overpriced assets are marked down, firms that overleveraged weak collateral are declared insolvent and liquidated, and creditors who can no longer afford their loans are declared bankrupt and their remaining assets liquidated to pay their creditors.
