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By Martin Wolf
Published: April 21 2010 03:00 | Last updated: April 21 2010 03:00
Can we afford our financial system? The answer is no. Understanding why this is so is a necessary condition for evaluating ideas for reform. The more aware of the risks one is, the more obvious it becomes that radicalism is the safer option.
People pay too much attention to the direct cost of bail-outs. As Andrew Haldane of the Bank of England, author of several brilliant papers on the crisis, has noted , these costs may be around 1 per cent of gross domestic product in the US and UK. The costs that matter, however, are those of the recession and the huge jump in public debt. If only a quarter of the world's loss of output during the recession were to prove permanent, the present value of these losses could be as much as 90 cent of annual world product.
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