That’s the name some are giving this week’s financial meltdown:
“For the last seven years we have spoken of living in a post-9/11 world. I think one day soon it may be more significant that we live in a post-9/14 world.”
Here’s some additional commentary from around the Internet.
Paul Krugman:“Worse than it Looks.”
Felix Salmon: “This thing ain’t over yet. In fact, it’s barely begun.”
Andrew Leonard: “The Wall Street Meltdown and You.”
“My take on the B of A buyout is that Hank is piling up all the **** into one huge **** on B of A’s books so that when they go under it is clearly too big to fail and can be handled in one fell swoop.” From a comment at Calculated Risk via Marginal Revolution. I heard the very same comment at the office today.
Arnold Kling provides the best-case scenario. (His prediction for the day was pretty darn accurate).
Lots of bullet-dodging going on out there. I am of two minds on this one. It looks like a massive house of cards ready to collapse. That said, ever since the Great Depression, modern regulatory bodies have been essentially able to manage their way of of financial crises. (My dissertation examined the S&L debacle, the response to it, and its impact on urban form). My hunch is we will once again manage our way out of this one: the Great Crash is not around the corner. That said, this one also looks potentially a lot worse than the others.
We’ll surely know much more tomorrow and certainly by week’s end. Hold on tight.
September 15th, 2008 at 8:10 pm
Your dissertation sounds interesting. Have you ever thought about uploading uploading it?
September 15th, 2008 at 8:10 pm
I can’t predict where the market will head, but a couple of observations.
During the Clinton administration the Dow tripled from around 3,500 to around 10,000. During Bush it’s been basically flat and may end up having lost value over 8 years. This from a supposedly “pro-business” administration.
The financial mess is one of the of the results of the massive deregulation since the late 1970’s. Banks, Savings & Loans, Electricity, Airlines, Phone Companies — in every case, service to the customer, the average American, has deteriorated. And in every case I’d say the industry has suffered, and most have had severe scandals, airlines being an exception. In all cases the regulation probably needed to be adapted for the late 20th and early 21st century, but the total abandonment of oversight has put us behind most of the developed world.
September 15th, 2008 at 10:59 pm
I am not one to seek the spotlight or brag, but I predicted this 13 years ago. During the height of the “go go 90s” I exhorted the NY Times readership that Congress and then-Treasury Secretary Rubin were playing with fire. Well…read for yourselves.
http://query.nytimes.com/gst/fullpage.html?res=990CE0D7123DF936A35750C0A963958260&scp=1&sq=Mark%20Samber&st=cse
Too bad nobody in politics or the media pays attention to History–they could benefit from a real history lesson or two. Maybe we wouldn’t be in this colossal mess.
Richard, hope you’re well.
Mark
September 16th, 2008 at 4:46 am
“…we will once again manage our way out of this one:…”
Well I think you can only manage/manipulate the economic system so much. For example, the dollar is being propped up and gold is being kept down by use of derivatives from central banks according to one article I read “The Great Dollar Pump of 2008: A Doomed Central Bank Intervention” by: James Conrad on Seeking Alpha.
This is causing a break between the physical market for gold/silver and the paper market. Thus, gold is being bought for much more over the spot price for gold by many gold dealers because people are refusing to sell their gold for such a low spot price. Since gold/silver are precious metals and are in limited supply unlike paper gold futures contracts, eventually there will be a collapse in the paper gold market since no one would trust the spot price of gold/silver any more as an accurate gauge of the current value of gold/silver.
September 16th, 2008 at 1:32 pm
I agree that we’ll manage our way out of this mess and a new financial nerve center will begin to emerge. Hamiltonian federalism will make a come-back. Government can be an enormous difference-maker in the area of national finance (and should be). The Lehman example shows that the Fed will not bail-out everyone. There’s a strategic approach to this and each bail-out comes with strings attached and a fair degree of control being left in the hands of the regulators. Wall Street might look very different at the end of this and that could be good news for Main Street; and especially boutique firms. Government sponsored economic development (lending, not spending) is the key to our future prosperity and it should be occurring beyond the local level and outside of the colleges and universities. Taking quasi-governmental control of the top tier of the financial system is a big first step. Entrepreneurship would soar if the federal government seeded it. The capital used to prop-up these banks after their CEO’s and executives have walked with much of the loot should be available to stoke the dreams and ideas of tomorrow’s new business creators the next time.