The alternative is to restructure debts passively via inflation, stealthily transferring wealth from older asset-owning generations to younger generations of debtors.

WSJ: Osborne Is Losing His Allies on All Sides

Under the Basel III rules, banks have to restructure their balance sheets to meet new liquidity and risk-weighted asset ratios, and small-business loans can often fall under the riskier categories.

WSJ: Post-Recession Loans Lag

In the US, for instance, financial problems of the state of California are less dramatic for Californian banks because their activities and asset holdings are more diversified across the US. If a bank faces financial difficulties, funds required to restructure or recapitalize the bank would not have to come from the California government, but rather from a federal institution.

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