Our economic house of cards continues to fall. Citigroup is next, they say.
Daniel Gross argues that we’re not reliving the Great Depression all over again:
Ironically, the differences between the two eras can be summed up in a few sound bites. The world of 1929-33 was one that lacked shock absorbers such as Social Security and deposit insurance to insulate people from economic disaster. In the 1930s, some of the world’s largest economiesâ€”Germany, the Soviet Union, Japan, and Italyâ€”were run by leaders hostile to the very notion of market capitalism. Today, U.S.-style market capitalism is under assault from self-inflicted wounds, and Germany, Italy, and Japan (Russia, not so much) are working with the United States to cope with a common problem. Back then, we were cursed with a feckless Federal Reserve, and a wealthy Treasury secretary, Paul Mellon, saw the downturn as a force for good. “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” he said. “People will work harder, live more moral lives.” By contrast, today’s Federal Reserve chairman, Ben Bernanke, is a student of the Great Depression, and the wealthy Treasury secretary, Henry Paulson, wants to provide liquidity to stocks, farmers, and real estate. A final difference: After the 1929 crash, the nation had to wait more than three years for a president who simply wasn’t up to the job to leave the scene. This time, we’ve got to wait only two more months.
Paul Krugman says Gross is missing the point.
The reason weâ€™re making analogies with the Great Depression â€” and the reason Iâ€™ve come out with a new edition of The Return of Depression Economics â€” is the collapse of policy certainties. In particular, the Fedâ€™s sudden impotence â€” its inability to cut rates any more, because theyâ€™re essentially zero â€” is a very real parallel with the Depression, and necessitates drastic responses.
Now, if all goes well the Obama stimulus plan will head off the worst. But that will be precisely because we understood that the current crisis is, indeed, like the Great Depression in important ways. Only those who learn from history can hope to avoid repeating it.
Bush, meeting with international leaders in Peru, warned against government intervention in free markets after weeks of overseeing one of the largest government financial interventions in U.S. history.
Many pundits argue that the nation can’t afford to keep Bush in office for three more months, because we need effective leadership now. Good luck with that. We’ll be lucky if he doesn’t chain himself to the Resolute desk on Inauguration Day, forcing the Secret Service to saw the priceless antique apart and carry him out of the White House.
So the ship of state will continue to float along aimlessly for the next, what, 58 days? Tom Friedman writes,
Right now there is something deeply dysfunctional, bordering on scandalously irresponsible, in the fractious way our political elite are behaving â€” with business as usual in the most unusual economic moment of our lifetimes. They donâ€™t seem to understand: Our financial system is imperiled.
The Bushies haven’t shown any inclincation to govern responsibly lo these past seven years and ten months. And now Friedman is upset? I guess the loss of billions of dollars of his wife’s wealth got his attention.
Today, bloggers on the Right are hysterical about the impending Obama Administration, which will combine the worst elements of Franklin Roosevelt and George McGovern. Some bloggers on the Left are already certain that the Obama Administration will be the same old entrenched Washingtonian politics-as-usual Big Fat Zero, and maybe it will. I’m making no specific predictions about what he will or won’t do. Maybe he’ll surprise us. Maybe he won’t. We’ll see.
In the meantime, I see little else to do but keep breathing.