In an interview with ABC News’ Terry Moran, President Obama made a few comments about nationalization.

 MORAN: There are a lot of economists who look at these banks and they say all that garbage that’s in them renders them essentially insolvent. Why not just nationalize the banks?

OBAMA: Well, you know, it’s interesting. There are two countries who have gone through some big financial crises over the last decade or two. One was Japan, which never really acknowledged the scale and magnitude of the problems in their banking system and that resulted in what’s called “The Lost Decade.” They kept on trying to paper over the problems. The markets sort of stayed up because the Japanese government kept on pumping money in. But, eventually, nothing happened and they didn’t see any growth whatsoever.

Sweden, on the other hand, had a problem like this. They took over the banks, nationalized them, got rid of the bad assets, resold the banks and, a couple years later, they were going again. So you’d think looking at it, Sweden looks like a good model. Here’s the problem; Sweden had like five banks. [LAUGHS] We’ve got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the problems in terms of managing and overseeing anything of that scale, I think, would — our assessment was that it wouldn’t make sense. And we also have different traditions in this country.

Obama: No ‘Easy Out’ for Wall Street, 2009-02-10

On the face of it, we have two paths, one right and one wrong.  Tradition apparently dictates the wrong one.  I say tradition, because while this country has thousands of banks, many are healthy.  As Kedrosky notes, that objection ignores the relative GDPs of the two countries as well as the fact that the six largest banks represent the lion’s share of the problem.

It is possible Obama does not feel there is sufficient political support for nationalization, and so will run with the current plan until attitudes are more favorable.  I acknowledge that this is only conjecture, but feel it appropriate to ascribe some measure of strategic planning to this administration.

China’s statistical bureau reported that industrial production for November grew 5.4% year-over-year according to Bloomberg.  The more interesting quote from the article is this:

Electricity output fell by 9.6 percent from a year earlier. Pig-iron production fell 16.2 percent. Raw steel declined 12.4 percent. Steel products tumbled 11 percent.

To echo the concerns of another CR reader, what is the break-even number for China due to the increase in urban population?  More critically, the drop in electrical output does not jive with the production numbers.  I would be very concerned.

The China number means nobody is buying here. Who finances our government? I just had this mental picture of the US economy flying through the air. It’s a 4 engine jet and we lost number 1 and 2 engines awhile back. Now number 3 just flamed out.

– nova, 2008-12-14

On a side note, it appears that North Korea has closed down both the northern and southern borders.  150,000 Chinese troops are now massed along the northern border, most likely as a prophylaxis against the collapse of the Kim regime.  Given North Korea’s precarious position and nuclear status, it is safe to assume that most players in the region are very interested in stabilizing the country and securing any loose buckets of instant sunshine.

It’s a petition. Like attending a protest, every so often it’s appropriate to make a statement. I say that even though I’ve told the lightbulb[0] joke and only attended one protest “in earnest”. We stand on the precipice of what is likely the greatest financial crisis in generations. The multi-billion dollar losses you may have heard about on the news? That’s the sound of cracks forming. The actual collapse will be truly spectacular.

You can find it at http://financialpetition.org. It calls on Congress to restore responsible lending practices, ban off-balance-sheet vehicles, restore the recently-gutted remnants of Depression-era banking regulation, and most importantly, to allow failure. Realize that at this point, scary as it may be, you are the adult in the room. So step up.

[0] “How many protesters does it take to change a lightbulb?”
“None, protesters can’t change anything.”