“My guess is that Seidman also understands Truth #5: Not all financial crises are created equal. When borrowers can’t pay their debts, you get a banking crisis, and as we’ve seen those are painful. But when governments can’t pay their debts you get a currency crisis, which is far worse. During Argentina’s recent currency crisis, the GDP fell by 10% in a single year, the unemployment rate jumped to 25%, and inflation hit 10% a month at one point.”
Partially true. When folks default, you have a housing forclosure crisis. When people go to the bank to withdraw demand deposits and the banks lack liquidity do to too many mortgages non performing, then you have a banking crisis. The numbers I see show that banks are using bail out $$$ to shore up capital and are slow in loaning out the money. Today the spread is huge and i see the huge spread as detrimental to expansion.
