by Robert Kuttner
This economic crisis doesn't have to be a second Great Depression - if government does nearly everything right, and soon. But if government doesn't do more, and fast, this could be worse than the 1930s. Why? Three big reasons:
Finance: A Doomsday Machine. The financial system is in far worse shape than it was when the stock market crashed in October 1929. In the 1920s, there was a stock market bubble, mainly because people could play the market "on margin," borrowing to invest in stocks. There were also scams like the original Mr. Ponzi's. Like in the present decade, the Federal Reserve helped to enable the game, with low interest rates and few rules.
But today, thanks to "securitization" of loans and the ability of insiders to create exotic and unfathomable financial instruments, the speculative system makes buying stocks on margin look like child's play. In the aftermath of the crash of 2008, the process of sorting it all out and getting banks functioning again is something that markets simply cannot do.
Read on...
After Punditman's interesting post about Ann Rand yesterday, Peacenik feels almost crass to be bringing up the collapse again. When this is all over historians may view Ann Rand as the 12 Monkeys of the present crisis. (12 Monkeys reference too obscure to explain. Rent the movie)
Today the Globe and Mail headlines "IMF dashes hope of short recession." Chrysler has threatened to pull out of Canada. Nortel may be breaking up. Its funny how quickly our lovely corporate citizens turn to threats as soon as the going gets tough. AIG: save us or we'll destroy the world. GM: save us or we'll be back in the stoneages. And on and on. Reading about Ann Rand and how Alan Greenspan was part of her "collective" made Peacenik want to ralph, again. And reading that Bernie Madoff is off to jail does not make things right. There are many more Benie Madoffs who should be in jail. And there are many more Ann Rand devotees pulling the strings in government and corporate America.
