In Praise of Bankruptcy

Tags: Booms and Busts, Money and Banks

10/28/2008 Henry Thompson

Bankruptcy is a normal part of economic life, covered by laws that guarantee stockholders will be compensated as much as possible. More efficient firms move in to take over what is left of bankrupt firms, buying what can be put to productive use. There is no crime in bankruptcy and, if handled quickly, little economic harm. The present financial problems would disappear quickly if the government let the markets operate and let inefficient firms go bankrupt, writes Henry Thornton.

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