Where Are the Grown-Ups?
by Paul KrugmanLink to article
This is an excerpt from Paul Krugman writing in in The New York Times. Click on link to read entire article.
“Many people on both the right and the left are outraged at the idea of using taxpayer money to bail out America’s financial system. They’re right to be outraged, but doing nothing isn’t a serious option. Right now, players throughout the system are refusing to lend and hoarding cash — and this collapse of credit reminds many economists of the run on the banks that brought on the Great Depression.
It’s true that we don’t know for sure that the parallel is a fair one. Maybe we can let Wall Street implode and Main Street would escape largely unscathed. But that’s not a chance we want to take.
So the grown-up thing is to do something to rescue the financial system. The big question is, are there any grown-ups around — and will they be able to take charge? … “
Tags: America's financial system, bailout, credit collapse, Paul Krugman, Wall Street
October 2nd, 2008 at 6:03 am
So there is a liquidity crisis.
Why is there a liquidity crisis? Because the banks are not loaning money. That’s the definition of a liquidity crisis.
What do the banks (through the Secretary of the Treasury) suggest we do about the liquidity crisis? Why, of course, we should give them $7,000,000,000 of taxpayer money to play with.
Is this a contrived crisis for the purpose of blackmail?
October 2nd, 2008 at 6:10 am
FDR was a grown-up, but these days, all we seem to find are people with a vested interest in the Ponzi deregulation scheme. Both parties seem to have drunk the Kool-Aid.
October 2nd, 2008 at 9:40 am
Question: Why not allow the credit system to collapse? Why not take that chance? Is this a crisis because we are concerned about 401k accounts? Or is it a crisis because we have discovered that the growth and wealth we have become accustomed to was never sustainable in the first place?
We have two opposing duties here: We can either bail out Wall Street and continue down the path of cheap credit. Or we can accept our fate and let the credit markets collapse, to be replaced by an economic system that is based on the real value of our resources.
This is why Krugman is right in the immediate timeframe, but wrong in the long-term. Are we afraid to let our credit markets die because it will cause too much suffering? Or are we afraid to let go because paper wealth has become so embedded in our culture?
I say truth is a higher cause than the continuance of a false economy. We either tear it down and build from scratch, or we keep lying to ourselves.
October 3rd, 2008 at 9:15 am
The present crisis has come about because, for over thirty years, the Federal government kept the economy juiced by expanding credit, in effect printing money for the rich. This caused the bubbles we have observed in the real estate and equities markets, in effect lacing them with funny money. Eventually, some people were unable to keep up with the game or they lost faith in it. That made the credit money vanish: hence, there is now a liquidity crisis. Paulson’s bailout solution is to create more of the same funny money, and therefore it will lead to a similar but greater crisis in the future. There is nothing “grown-up” about it; it is magical thinking and thumb-sucking.