Fixing the Toxic Paper Problem

Hernando de Soto has some straight forward advice for the the world’s governments if they want to truly address the current financial clusterf*ck and prevent a recurrence. The text below is from his summation. Be sure to read the full article to see the clear steps that must be taken to restore confidence to the markets.

…Above all, governments should stop clinging to the hope that the existing market will eventually sort things out. “Let the market do its work” has come to mean, “let the shadow economy do its work.” But modern markets only work if the paper is reliable.

Government’s main duty now is to bring the whole toxic environment under the rule of law where it will be subject to enforcement. No economic activity based on the public trust should be allowed to operate outside the general principles of property law.

Financial institutions will have to serve society and fully report what they own and what they owe — just like the rest of us — so that we get the facts necessary to find our way out of the current maze. They must begin learning to put on paper statements about facts, instead of statements about statements.

via Hernando de Soto Says Toxic Assets Emerged From a Shadow Economy – WSJ.com.

Related articles by Zemanta

• Effective Oversight in a Financial World Gone Bad? (christyhardinsmith.firedoglake.com)
• Where’s the stick? (economist.com)
• The Geithner Gist (andrewsullivan.theatlantic.com)