My grasp of economic theory and financial markets lies in that gray area between tenuous and risible. I am at the mercy of theorists and pundits and the guy beside me at the bar for an understanding of our current conditions. (I was born during the Great Depression, but was extremely young at the time and remember very little about it.)
However, if I may be permitted a goofy analogy (and as it’s my blog, I may) one need not be an electrician to suspect, as the lights get dimmer and dimmer, that the power company is experiencing difficulties, and that the lights could quickly go from dim to out.
And I am not the only one. Increasingly, articles like these are appearing in the press.
We knew things were bad on Wall Street, but on Main Street it may be worse. Startling official statistics show that as a new economic recession stalks the United States, a record number of Americans will shortly be depending on food stamps just to feed themselves and their families.
Emblematic of the downturn until now has been the parades of houses seized in foreclosure all across the country, and myriad families separated from their homes. But now the crisis is starting to hit the country in its gut. Getting food on the table is a challenge many Americans are finding harder to meet. As a barometer of the country’s economic health, food stamp usage may not be perfect, but can certainly tell a story.
As you probably noticed, that article was from a British newspaper. For whatever reason, the foreign press seems to be looking at this as a more serious problem than are the domestic media. Here’s an exception.
We’re suffering the aftereffects of the collapse of a Tinker Bell financial market, one that depended heavily on borrowed money that has now vanished like pixie dust. Like Tink, the famous fairy from Peter Pan, this market could exist only as long as everyone agreed to believe in it. So because it was convenient — and oh, so profitable! — players embraced fantasies like U.S. house prices never falling and cheap short-term money always being available. They created, bought, and sold, for huge profits, securities that almost no one understood. And they goosed their returns by borrowing vast amounts of money.
Yesterday, Tex Lameduck hustled Treasury Secretary Henry Paulson in front of the microphones to explain
how his administration was dealing with the situation. Neither Paulson’s explanation, nor its interpretation, provided much in the way of reassurance. Here’s how it looked to the Canadians.
U.S. Treasury Secretary Henry Paulson, who laid out details of the plan yesterday, said the proposals weren’t intended as a solution for the housing crisis and that any changes would stay on the back burner “until after the present market difficulties are past.”
“Our first and most urgent priority is working through this capital-market turmoil and housing downturn, and that will be our priority until this situation is resolved,” said Mr. Paulson, a former chief executive of Goldman Sachs.
I read through Paulson’s statements several times without finding anything more substantive than, “This blueprint addresses complex, long-term issues that should not be decided in the midst of stressful situations and should not be implemented to add greater burden to a market already under strain.”
Translated into people-speak, Paulson appears to be saying, “The shit is in the fan, and don’t expect us to wipe up the floor until we figure out how to unplug the fan.”
Okay, how do you unplug the fan? It may just be that you steal a page from the play-books of those reprobate dissolute freebooters in Scandinavia.
The US Federal Reserve is examining the Nordic bank nationalisations of the 1990s as a possible interim solution to the US financial crisis.
The Fed has been criticised for its rescue of Bear Stearns, which critics say has degenerated into a taxpayer gift to rich bankers.
A senior official at one of the Scandinavian central banks told The Daily Telegraph that Fed strategists had stepped up contacts to learn how Norway, Sweden and Finland managed their traumatic crisis from 1991 to 1993, which brought the region’s economy to its knees.
Norway ensured that shareholders of insolvent lenders received nothing and the senior management was entirely purged. Two of the country’s top four banks – Christiania Bank and Fokus – were seized by force majeure.
Can you imagine that happening here — shareholders receive nothing, and senior management entirely purged? Don’t think about it too long. It will make the inside of your head hurt.
Finally — and you’ll be asking yourself why this wasn’t first — look at this headline from more than two years ago. Granted, it may be a somewhat different situation, but the consequences are profoundly similar. And the treatment: research, analysis, therapy, and probably some bitter pills.
Depression is wreaking havoc on American productivity, accounting for $83 billion in costs to society each year, according to a report released Wednesday.
“The bottom line is the state of depression in America is a national tragedy,” said Lydia Lewis, DBSA’s president, during a briefing Wednesday at the National Press Club in Washington.
“This is not a trivial annoyance. This is the most disabling illness in the United States,” she said.
All right, you get the point (and the joke: it’s April 1). Still, you might want to glance at the full article for other parallels, such as my favorite, “Don’t be fooled by three-piece suits and briefcases.”