One of the most emailed articles from the NY Times on Wednesday was this one: ECONOMIC SCENE Lesson From a Crisis: When Trust Vanishes, Worry By DAVID LEONHARDT Published: October 1, 2008 The basic mechanics of how the economy might fall into a severe recession look quite similar to those that caused the Depression.
I found it very interesting, especially the historical perspective. I'm still not thrilled about what Congress is doing (frankly, I'd like to see a lot of people up against the wall, and their assets sold first to pay their debts...) but I hope like hell that there's some middle ground between the disaster that could be and the reality of what we have now.
Tom Friedman also wrote a provocative column today: OP-ED COLUMNIST Rescue the Rescue By THOMAS L. FRIEDMAN Published: October 1, 2008 Our leaders have gotten so out of practice of working together that even in the face of this meltdown they could not agree on a rescue package.
At first I didn't agree with Tom's point of view, but then I got to this section: Well, you say, “I don’t own any stocks — let those greedy monsters on Wall Street suffer.” You may not own any stocks, but your pension fund owned some Lehman Brothers commercial paper and your regional bank held subprime mortgage bonds, which is why you were able refinance your house two years ago. And your local airport was insured by A.I.G., and your local municipality sold municipal bonds on Wall Street to finance your street’s new sewer system, and your local car company depended on the credit markets to finance your auto loan — and now that the credit market has dried up, Wachovia bank went bust and your neighbor lost her secretarial job there.
We’re all connected. As others have pointed out, you can’t save Main Street and punish Wall Street anymore than you can be in a rowboat with someone you hate and think that the leak in the bottom of the boat at his end is not going to sink you, too. The world really is flat. We’re all connected. “Decoupling” is pure fantasy.
I totally understand the resentment against Wall Street titans bringing home $60 million bonuses. But when the credit system is imperiled, as it is now, you have to focus on saving the system, even if it means bailing out people who don’t deserve it. Otherwise, you’re saying: I’m going to hold my breath until that Wall Street fat cat turns blue. But he’s not going to turn blue; you are, or we all are. We have to get this right.
I can't argue with any of that -- he's right. It's time to do whatever needs to be done to fix the system this minute, get things back on track, and then... up against the wall! Time for new rules.
Even if some institutions fail, that doesn't mean their holdings fail. Their holdings will be liquidated in the bankruptcy, and the good ones will be bought up by other institutions, ones that didn't do (as many) stupid things. If we bail out the institutions that did a lot of stupid things, they'll keep doing stupid things. Stupid institutions should fail, and unfortunately people who invested money in them should lose it. Stocks are risky investments. That's why you're supposed to have a diversified portfolio.
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momijizukamori
Read this
Date: 2008-10-02 01:55 am (UTC)ECONOMIC SCENE
Lesson From a Crisis: When Trust Vanishes, Worry
By DAVID LEONHARDT
Published: October 1, 2008
The basic mechanics of how the economy might fall into a severe recession look quite similar to those that caused the Depression.
I found it very interesting, especially the historical perspective. I'm still not thrilled about what Congress is doing (frankly, I'd like to see a lot of people up against the wall, and their assets sold first to pay their debts...) but I hope like hell that there's some middle ground between the disaster that could be and the reality of what we have now.
Tom Friedman also wrote a provocative column today:
OP-ED COLUMNIST
Rescue the Rescue
By THOMAS L. FRIEDMAN
Published: October 1, 2008
Our leaders have gotten so out of practice of working together that even in the face of this meltdown they could not agree on a rescue package.
At first I didn't agree with Tom's point of view, but then I got to this section:
Well, you say, “I don’t own any stocks — let those greedy monsters on Wall Street suffer.” You may not own any stocks, but your pension fund owned some Lehman Brothers commercial paper and your regional bank held subprime mortgage bonds, which is why you were able refinance your house two years ago. And your local airport was insured by A.I.G., and your local municipality sold municipal bonds on Wall Street to finance your street’s new sewer system, and your local car company depended on the credit markets to finance your auto loan — and now that the credit market has dried up, Wachovia bank went bust and your neighbor lost her secretarial job there.
We’re all connected. As others have pointed out, you can’t save Main Street and punish Wall Street anymore than you can be in a rowboat with someone you hate and think that the leak in the bottom of the boat at his end is not going to sink you, too. The world really is flat. We’re all connected. “Decoupling” is pure fantasy.
I totally understand the resentment against Wall Street titans bringing home $60 million bonuses. But when the credit system is imperiled, as it is now, you have to focus on saving the system, even if it means bailing out people who don’t deserve it. Otherwise, you’re saying: I’m going to hold my breath until that Wall Street fat cat turns blue. But he’s not going to turn blue; you are, or we all are. We have to get this right.
I can't argue with any of that -- he's right. It's time to do whatever needs to be done to fix the system this minute, get things back on track, and then... up against the wall! Time for new rules.
My 2 cents.
Re: Read this
Date: 2008-10-02 11:48 am (UTC)If we bail out the institutions that did a lot of stupid things, they'll keep doing stupid things. Stupid institutions should fail, and unfortunately people who invested money in them should lose it. Stocks are risky investments. That's why you're supposed to have a diversified portfolio.
no subject
Date: 2008-10-02 07:27 am (UTC)