I thought we won the cold war. As it turns out, it doesn't take an opposing superpower to cripple our economy. It's as if we left the shoot-out at the OK Caral and rode off, not into the sunset, but over a cliff.
If I sound flip as we tumble into the most dire economic crisis since the Great Depression, it's because I really don't know what's what. This weekend the White House sent Congress a proposal to buy mortgage-related assets from U.S.-based companies. If approved, it would represent the single largest allocation of funds in nation's history ($700 billion). When I read the full text of the proposal two sections, in addition to the price tag, caught my eye.
Sec. 3. Considerations. In exercising the authorities granted in this Act, the Secretary shall take into consideration means for (1) providing stability or preventing disruption to the financial markets or banking system; and (2) protecting the taxpayer.Uh... how about reversing that order?
Sec. 10. Increase in Statutory Limit on the Public Debt. Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.Cornell University's code collection reveals the public debt ceiling would be raised from $8.1. Why the $3 trillion bump, if we're only contemplating $0.7 trillion expenditure? (A little context: the annual federal budget is only $4 trillion.) How much more do we plan to spend?
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Here are few pieces I've seen / read / heard recently that have helped keep me somewhat clued in.
The Charlie Rose Show (Monday, September 15, 2008)
A discussion about the crisis on Wall Street with Lawrence Summers, Andrew Ross Sorkin of The New York Times Charles Gasparino of CNBC, Josh Rosner of Graham Fisher & Co. and Nouriel Roubini. Lehman Brothers, the fourth-largest US investment bank, has filed for bankruptcy protection, stock markets and the US dollar have tumbled in reaction to Lehman's collapse. Watch the video.
Bill Moyers Journal (Taped Thursday, September 19, 2008)
Bill Moyers sits down with former Nixon White House strategist and political and economic critic Kevin Phillips, whose latest book Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism explores the role that the crumbling financial sector played in the now-fragile American economy.
The Giant Pool of Money from This American Life (May 9, 2008)
I highly recommend this story for its accessibility. This program about the housing crisis was produced in a special collaboration with NPR News. What does the housing crisis have to do with the turmoil on Wall Street? Why did banks make half-million dollar loans to people without jobs or income? And why is everyone talking so much about the 1930s? It all comes back to the Giant Pool of Money.
Bubble and Bail by Kevin Phillips in The American Prospect (May 5, 2008)
For most of the 20th century, America manufactured things. For the past 30 years, though, it has chiefly manufactured debt. Here's how Wall Street, with the aid of both political parties, gravely damaged the economy.
Foreclosure Phil by David Corn in Mother Jones (July/August 2008)
Years before Phil Gramm was a McCain campaign adviser and a lobbyist for a Swiss bank at the center of the housing credit crisis, he pulled a sly maneuver in the Senate that helped create today's subprime meltdown.
The Panic of 1907 per wikipedia.org
Also known as the 1907 Bankers' Panic. The stock market fell nearly 50% from its peak in 1906, the economy was in recession, and there were numerous runs on banks and trust companies. Its primary cause was a retraction of loans by some banks that began in New York City and soon spread across the nation, leading to the closings of banks and businesses. The 1907 panic was the fourth such panic in 34 years.
Twelve pre-Great Depression "panics" as described on History Box.