I know what you mean. I get on the internet and I see everyone running around, both here and in Washington, freaking out. At work all the business conferences are from financial companies worried about their futures. And then I go out to the mall or to the grocery store, and while prices are higher than they used to be, businesses dealing in real goods and services are still banging along, happy and relatively prosperous.
I think if this crisis helps shake people of the ‘money for money’s sake’ mindset, that can only be a good thing.
Hey, it’s not my fault your location field is blank.
What on earth was the point of demutualizing building societies? Then they’re just… well, banks. Don’t they have charters prohibiting that sort of thing?
Some very clever bastards noticed that the organisations were sitting on good reserves of assets, and were far less risky than banks. And they thought “if we demutualize, we can cash in on this”. And they did.
Wasn’t that clever. Right up there with thinking that lending money to people with low-income to buy houses with minimum deposits was a good move. Or other people thinking that purchasing those debts from other institutions was a way to get in on the action. Or any of a number of recent moves by the financial institutions of the US and UK which currently have me re-evaluating my previous belief that capitalism works with minimum intervention.
I think you need to re-evaluate the definition of “works”. I don’t think there’s any debate at all that capitalism can produce much bigger gains with minimum intervention.
However, there’s also very little (rational) argument against the fact that capitalism also produces much bigger losses with minimum intervention.
I saw a chart this morning that showed the largest percentage and point drops in history. Three of the five largest point drops have occurred in the past eight years. An interesting raw statistic.
I agree that European banks are in the shit too, for their own stupid reasons, but the situation in the US is the Big One.
You acknowledge in later posts the interconnectedness of the global economy. Do you think, if Congress were unable to proceed with any kind of bailout and the US economy tanked, that our economies here (and elsewhere in the capitalist world) would survive without massive repercussions, bankruptcies, redundancies, etc.? I don’t.
The thing that makes me concerned is that without “sucking out the toxins” (as Robert Peston analogises with nary a burning house, MP3 or heroin addict in sight), if “something else bad” happens while all this is going on - another terrorist attack in the US, outbreak of war between two large economies, or in a politically sensitive area, or some other coincidental economic disaster in an unrelated market - it would precipitate an unsalvageable downward spiral.
Not so. The largest rise in the DOW was between 1980 and 2000. Immediately upon Bush’s election, there was a major drop (April 2000), then after 9/11, another major tank, then this most recent bomb. After eight years of stellar leadership from the White House, the DOW has managed to end up lower than it was when Bush took office, and the current credit crisis threatens to decimate families. That’s quite a legacy.
Interesting to note that the last big tank was in 1987 during Reagan’s (aka Master Deregulator) regime.
Speaking of blaming Democrats, the RNC sent an ad out excoriating the bailout, and hanging it around Obama’s neck, yesterday morning. (It wasn’t supposed to, and didn’t, get aired until today. But the ad must’ve been cut Sunday, since a Lansing, MI radio station got it at 7:55am yesterday, and other stations got it yesterday morning.)
That was, of course, hours before the Pelosi speech that the GOP Congresscritters gave as their reason for throwing the country under the bus.
That’s obviously been their game all along: to get the Dems to compromise with them, producing a stinker of a bill, and then pull out and stick the Dems with the blame.
Didn’t expect to find such blatant proof of it, though.
It’s not what’s happening now - it’s what happens three, six twelve months, two years from now. With the ‘money for money’s sake’ companies ceasing to loan to each other, or ceasing to be altogether, and the banks in gridlock, nobody is financing anything, money goes into bonds not stocks, IPOs cease, nobody’s spending, so companies’ profits drop but they can’t borrow to tide themselves over, so they downsize, then the bankruptcies start. It’s a consumer economy and people aren’t spending, so your mall starts displaying empty lots, and there are fewer people shopping in the grocery store and they’re looking for bargains not luxury goods, so profits drop in the supermarket, they lay half the workforce off, and those former workers decide they don’t need to change the oil this month, and those tires will last another six month, and suddenly right down the other end of the scale, Joe’s Tire and Lube Shop, running for thirty years, turns off the lights and closes for the last time and Joe sadly puts the last nail into the last of the boards that he’s used to cover the windows.
They won’t have to figure it out, we’ll do it for em. They will (meaning Russia and China), by the time all of this is over, bailout or not, will own a goodly portion of our country. By own, I mean, hold the debt on, meaning that both the Russkies and the Chinese will have the final say in what we do and where in the world we do it. We’re already fucked, we just have yet to feel it.
I think the scenario you are painting here is highly exaggerated, for precisely the same reasons that “Trickle-down” economy never worked – pouring money into the top doesn’t make it rain money on the people at the bottom; not immediately, not in the long run, never. Similarly, sucking money off of the top won’t magically suck the money out of the pockets of the people on the bottom.
Not to say there won’t be cases like you’re describing, but it most likely will happen as sad anecdotes, not as a ubiquitous theme, IMHO.
