This is serious
The U.S. economy is in real danger. It might pull through on it’s own, but no one knows—no one. Least of all Michael Moore or Mike Huckabee. They and the naive democrats and the more numerous extreme republicans are a danger.
I’m an economist—but finance is not my field. During the California electricity meltdown I attended a meeting with several high-level financial economist about how it was turning into a financial crisis. This was their message: It is extremely dangerous and can move very fast without warning. Basically, a financial market, without enough government stabilizers, can self distruct in a flash.
What’s going on
It’s complex, but it’s also simple. From 1870 — 1934 we had a banking crisis every ten years. Banks and financial markets work well when people have confidence in them. But when something goes wrong in one corner, it’s impossible to know how widespread it is, and people lose confidence. They want to grab their money and put it somewhere safe — that’s sensible for the individual, but it causes a financial panic that is self perpetuating.
In the Great Depression the government began requiring deposit insurance, and limiting banks leverage. This gives people confidence even when something goes wrong in one corner. No more bank panics. The government makes the market work, the market makes the country work.
But financiers don’t like to pay for insurance and like to leverage their investment. Market fundamentalism–the idea that all we need is markets–began to spread because the markets were working well (no more bank panics). Eventually the financiers found ways around the government stabilizers and now we are back into pre-depression instabilities. But today it more global and more complex.
But Wall Street is Ripping off Main Street !!!
Yes there was some of that going on. And there will be more of it in the $700 B bailout. But when the ship is sinking it’s the wrong time to dock the captain’s pay. Focus on saving the ship. Sure, improve the bailout plan from what Paulson presented. Get more collateral for the bailout money. But pass a bailout bill and pass it now.
There were a lot of stupid Michael-Moore Democrats against it, but a lot of them just didn’t want to get beat up by all the Republicans who voted against it and would then blamed the Dems for what will be a messy bailout. Truth is, the conservative Republicans who tanked the bailout (on the first round) are the same Republicans that always vote against regulations to stabilize the financial sector. The Huckabee Republicans were the bigger problem before and again now.
In the long run, Republicans need to stop demonizing the government, and Democrats need to stop demonizing the market. In my view Obama is the best antidote to both Michael Moore and Mike Huckabee