The main problem I have with Obama's outlined "plan" for the economy is that he addresses smaller issues that make voters feel good in the short term, but in reality (even if he does intend to carry out everything he has listed), these proposals will NOT fix a broken economy. Sweeping changes are needed, and almost everything he proposes reeks of more governmental control, rather than arms-length assistance and solutions.
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"God, send me anywhere, only go with me. Lay any burden on me, only sustain me. And sever any tie in my heart except the tie that binds my heart to Yours."
--David Livingstone
"To see no being, not God’s or any, but you also go thither,
To see no possession but you may possess it—enjoying all without labor or purchase—
abstracting the feast, yet not abstracting one particle of it;…."
--Walt Whitman, Leaves of Grass, Song of the Open Road
Yes, the problems to be worked out this time seem scarier than most. And watching institutions like Bear and Lehman fail, and Merrill Lynch taken over just like that, doesn't inspire confidence.
But they're no different from other investment firms of the past that have paid the price for making too many bad decisions or taking too many risks in what is already a high-risk business.
How long all this will last is anyone's guess. But this a big country, with a highly liquid market and a still-strong economy. We'll get through it.
The turmoil in the financial markets will reorganize the financial landscape. But this does not mean the financial industry will shrink dramatically. In fact the current crisis could well lead to an increase in the demand for financial services, as the world grapples with the need for new financial instruments, new risk management techniques, and the increasing complexity of the financial world.
We can argue about who was responsible for the overleveraging of the financial industry and the poor to nonexistent credit standards that prevailed in real estate. Certainly the regulatory agencies, including the Federal Reserve, should have sounded a warning. But the lion's share of the blame must go to the heads of the financial firms that issued and held these flawed credit instruments and then, in many cases, "doubled down" by buying more when their price was falling.
It is shocking that firms that withstood the Great Depression are now failing in what economists might not even call a recession. But their failure was not caused by lack of demand for their services. It was caused by management's unwillingness to understand and face the risks of the investments they made. The names of the players will change, but the future growth of the financial services industry is assured.
In our capitalist system there are losers as well as winners. There are failures as well as successes. Harking back to the eminent economist Joseph Schumpeter, the old failures will be replaced by new enterprises.
Obama is on the campaign trail predictably charging that a lack of regulations during the Bush era is responsible for the current mess. But he’s misreading history. As George Mason economist Tyler Cowen wrote in the New York Times, one of the problems with the U.S. financial system is not a lack of regulation, but a lack of smart and effective regulation.
It’s easy to be overly pessimistic right now. But that negativism is not written in stone. Mr. Paulson talks about a housing and financial recovery in terms of months, not years. And I think he’s right. But his courageous action to put a stop to bailout fever will do as much as anything to move the nation toward recovery.
Referring to "Obama" as the next FDR might be quite the misnomer.
"...War ended the Depression simply because of increased government spending, an intensified version of what Roosevelt was already doing with the WPA and similar programs.. Responding to the external threats posed by the Axis Powers (Germany, Japan and Italy) Roosevelt and the Congress threw fiscal caution to the wind and spent what was necessary to win the war. In so doing, they also achieved pre-Depression levels of employment and prosperity.
What then is the legacy of the New Deal as a whole? Would it have ended the Depression? The best answer to that is that it went a long way toward alleviating the worst suffering of the Depression while still being captive to the conventional thinking (political, fiscal, racial) of the day. We cannot answer that question of whether it could have ended the Depression based on historical facts. World War II interrupted the process.
What are the other long-term consequences of the Depression and New Deal? The rise of the "Roosevelt Coalition" of farmers, union members, working class people, Northern blacks and liberals made the Democratic Party the nation's dominant party for almost sixty years. Further, the political consensus that developed after World War II held that never again should the government allow another depression to take hold. Thus, there followed an unprecedented level of federal economic intervention. This huge expansion in the role, size and power of government in American social and economic life is aptly summed up in Republican President Richard Nixon's famous 1971 remark, "We're all Keynesians now."'--Source
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"God, send me anywhere, only go with me. Lay any burden on me, only sustain me. And sever any tie in my heart except the tie that binds my heart to Yours."
--David Livingstone
"To see no being, not God’s or any, but you also go thither,
To see no possession but you may possess it—enjoying all without labor or purchase—
abstracting the feast, yet not abstracting one particle of it;…."
--Walt Whitman, Leaves of Grass, Song of the Open Road
(Reuters) - The Federal Reserve will provide a roughly $85 billion bridge loan to AIG (AIG.N) and take a nearly 80 percent stake in the company, according to a source briefed on the matter.
CNBC earlier reported the bridge loan would be secured and that shareholders would be severely diluted by the bailout.
Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and others were involved in the talks, CNBC said, adding that the bailout plan being negotiated "isn't a conservatorship."
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Master of Science in Applied Disgruntled Religious Theorist Wrangling
PhD in Petulant Tantrum Quelling
Dean of the School of Hard Knocks
Hybrid Mode
