by Damozel | See this clip at Bloomberg News. According to Bloomberg News, we aren't going to get a harmonized response or coordinated plan from the countries who intended this week's conference. Krugman still maintains that a coordinated response is what we need most. He finds the G7 response "disheartening." Krugman says, "It turns out that not rescuing Lehman was a big mistake" and that the failure to announce a plan this weekend would be like Lehman to the 10th power.....a serious recession is in the mail and the credit stress may bring about a Depression.
Meanwhile, Fareed Zakaria at Newsweek sees a very faint silver lining:
I'm betting that, in the end, the world's governments will win this battle against fear. They have potentially unlimited tools at their disposal, especially if they act in concert...
Amid all the difficulties and hardship that we are about to undergo, I see one silver lining. This crisis has—dramatically, vengefully—forced the United States to confront the bad habits it has developed over the past few decades. If we can kick those habits, today's pain will translate into gains in the long run....
Since the 1980s, Americans have consumed more than they produced—and they have made up the difference by borrowing...
Two decades of easy money and innovative financial products meant that virtually anyone could borrow any amount of money for any purpose. If we wanted a bigger house, a better TV or a faster car, and we didn't actually have the money to pay for it, no problem. We put it on a credit card, took out a massive mortgage and financed our fantasies.....
But the average American's behavior was virtue itself compared with the government's. Every city, every county and every state has wanted to preserve its many and proliferating operations and yet not raise taxes....
Under Alan Greenspan, the Federal Reserve obstinately refused to inflict any pain. Russian default? Cut interest rates. Worried about Y2K? Cut rates. NASDAQ crash? Cut rates. The economy slows after 9/11? Cut rates. Whatever the problem, the solution was to keep the money flowing and goose the economy. Eventually, by putting the housing market on steroids, the strategy created problems too large to untangle. (More)
I've heard Deb Cupples say repeatedly that our economy was sickening; I suppose that if it doesn't die, it might emerge stronger....eventually. Certainly it's been living on borrowed time. It's astonishing how fast the crash came once things started to unravel.
Justin Gardner hopes that this means the end of easy credit and the consumer society. (Donklephant) He points out:
Basically, if the housing market didn’t tank, we were all bound for a massive personal debt bubble sooner or later. But those bubbles would have happened one by one, personal tragedy after personal tragedy, with creditors taking anything and everything they can liquidate.
And there would be no rescue package for us, and nobody would have noticed until the economy started sinking into recession for no apparent reason.
So yes, while all of this may seem gloomy, there’s actually a lot to look forward to. A new era of personal responsibility, but for real this time.
I hope so because that's a sort of "personal responsibility" we haven't seen in play during these last padded, pampered, consumption obsessed 30 years.
The country's had its head up its arse and its priorities backasswards for far, far too long. I personally blame Reagan and the horrible values his reign ushered in, but it really doesn't matter; and you're free to blame anyone you like.
The question is how we reinvent ourselves.
Memeorandum has commentary on the Zakaria piece here.
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