Robert Kuttner: Surviving the Great Collapse

[marmar]

via the Boston Globe:



Surviving the Great Collapse
By Robert Kuttner

March 12, 2009


THIS ECONOMIC CRISIS doesn't have to be a second Great Depression - if government does nearly everything right, and soon. But if government doesn't do more, and fast, this could be worse than the 1930s. Why? Three big reasons:

Finance: A Doomsday Machine. The financial system is in far worse shape than it was when the stock market crashed in October 1929. In the 1920s, there was a stock market bubble, mainly because people could play the market "on margin," borrowing to invest in stocks. There were also scams like the original Mr. Ponzi's. Like in the present decade, the Federal Reserve helped to enable the game, with low interest rates and few rules.

But today, thanks to "securitization" of loans and the ability of insiders to create exotic and unfathomable financial instruments, the speculative system makes buying stocks on margin look like child's play. In the aftermath of the crash of 2008, the process of sorting it all out and getting banks functioning again is something that markets simply cannot do.

We are not even clear who owns what. The wise guys on Wall Street invented a doomsday machine from which there is no market escape.

In 1929 when the stock market crashed, the banking system was relatively healthy. Bank customers played these speculative games and took the losses, not banks. This time, the banks drank their own Kool-aid. ........(more)

The complete piece is at: http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2009/03/12/surviving_the_great_collapse/

[rhett o rick]

1. I think the pill we have to take to survive is too big. I think they will find away to postpone the

total collapse.