Brown Monday: open thread on today's economic panic.
Floyd Norris, liveblogging the panic today at the NYT -- The Great Crash of 2008:
2:45 p.m. ET: If the S.&P. 500 closes where it is now, (1009.07, down 8% for the day) it will have lost more than 13% over the past three sessions. The only other time declines of that magnitude occurred since World War II was in the crash of 1987. Prior to that, the last one was in May 1940, when France fell to Germany.Discuss, and breathe deeply, folks. We're gonna get through it together. (ht for the hed @Howard Rheingold)
Video: "The 1929 Stock Market Crash newsreel."
UPDATE: Our community manager Teresa Nielsen Hayden points to this NYT analysis by Joe Nocera as "the most lucid explanation" for what's going on:
This is what a credit crisis looks like. It’s not like a stock market crisis, where the scary plunge of stocks is obvious to all. The credit crisis has played out in places most people can’t see. It’s banks refusing to lend to other banks — even though that is one of the most essential functions of the banking system. It’s a loss of confidence in seemingly healthy institutions like Morgan Stanley and Goldman — both of which reported profits even as the pressure was mounting. It is panicked hedge funds pulling out cash. It is frightened investors protecting themselves by buying credit-default swaps — a financial insurance policy against potential bankruptcy — at prices 30 times what they normally would pay.As Credit Crisis Spiraled, Alarm Led to Action (NYT via Balloon Juice.)It was this 36-hour period two weeks ago — from the morning of Wednesday, Sept. 17, to the afternoon of Thursday, Sept. 18 — that spooked policy makers by opening fissures in the worldwide financial system.
Also, everyone reading this blog should stop what they're doing right now and go listen to This American Life's epic episode from Friday: Another Frightening Show About the Economy.
Alex Blumberg and NPR's Adam Davidson—the two guys who reported our Giant Pool of Money episode—are back, in collaboration with the Planet Money podcast. They'll explain what happened this week, including what regulators could've done to prevent this financial crisis from happening in the first place. You can learn more about the daily ins and outs and join the discussion on the Planet Money blog.Here's the direct MP3 Link.
the latest
latest episodes
Bush = fail... there, I said it.
[runs and hides]
Yay. Creative destruction. Now we can build an economy on something real and not 60 trillion $ of shadow bullshit. This is the best thing that could have happened in the long run.
In before (the markets) lock.
The sound of a nation slapping hand to forehead when Joe Public finally realizes this has been a setup by you-know-who using the powers gained after you-know-what to impose martial law before the you-know-when can happen will be deafening.
O hai. I can haz $700,000,000,000 moar plz?
Can we ask for the bailout money back? (This is a serious question.)
As seen elsewhere on Boing Boing: the most lucid explanation I've seen for the bailout.
LOL@YEZZER!
I really feel this is something that HAS to happen. The market has been artificially inflated for a long time now (just like the housing market), and now it is "adjusting". Yes- it will suck, but more bail-outs aren't going to help anything. We can't just print money and hope we can cover it later...
They already took all my money. I don't have any more to spend!
Joel, back from whom? Need more context.
World markets are reacting to the reality that American politics will not allow us to do what needs to be done, Nationalize the banking system and perhaps parts of our energy production and auto industry.
We are way too frightened by socialism so we are allowing the us economy to rust out like an old Ford Nova. The markets aren't willing to pony up and pay for the big change and their uneasiness is leaving all commodities teetering on the brink. Sadly our houses were one such commodity.
ask all ya want, there, home-slice. i'm sure he will, uhhh, i mean THEY will truly consider it. not.
So you CAN solve a problem by throwing 810 billion dollars at it, can't you? Oh, evidently you can't. But where did that money GO? Into the pockets of the brokers who lost it in the first place. Foxes guarding the henhouse, if you ask me. So I predict that now they'll just hold the country hostage for ANOTHER Trillion dollars or so, because "This time it'll work For Sure!". Close your eyes and think of England, if you can get that reference.
Hey Washington D.C. America called an it wants it's 700 Billion back.
David Guerrero, "creative destruction" sounds fun, but what would get destroyed is the financial system we all depend on. It's like advocating the creative destruction of the street and highway system.
Joel, I believe the idea is that we're supposed to get some or all of the money back. I've turned on the PNH-signal, so you may get a fuller explanation soon.
At close today the market was only down 300 points -- still a big drop, but not as bad as it looked for a while there.
the house rejects the bailout, the DOW drops 700 points. the next day rebounds. the house passes the bailout, the DOW drops 800 points. and is already back up over 10,000. its all cyclical isn't it? won't low stocks just encourage savvy investers to invest? buy low?
how real is this "crash"? i can't understand it. i'm not a homeowner so maybe that is why i can't.
The theory of the Paulson plan is that we're supposed to get the money back -- the Treasury buys up stacks of this crappy debt, then later sells it off at a profit. (Yes, if this seemed to you to resemble the Underpants Gnomes Business Plan, you're not far wrong.) Also, in five years, the President is supposed to look at how this all went, and if the US treasury lost money on it, supposedly he or she can then take it out of the financial industry's hide.
Whether any of this will actually work as advertised is of course entirely debatable. I do think that people are getting way too focussed on the $700 billion--compared to the federal budget, the federal deficit, the GDP, and the GWP, spending many times that would be worth it if it averted the crisis and reinstated the conditions for prosperity. The problem is that the Paulson plan is an inefficient way of deploying the US government's massive resources, not that it entails spending a pile of money. We're going to have to spend a lot more piles of money than merely this, before this is all over.
Here's part of the basic scenario as I understand it:
Lots of people in other countries have their money invested in the United States.
If they think our system's crashing, they'll pull it out. That would be Very, Very Bad.
The bailout as currently formulated is way short of ideal, but with luck will keep a lid on things through the end of the Bush administration.
If we're lucky, the new administration will start working on major long-term repairs to the system.
If we're lucky, the new president won't be the candidate who has Phil Gramm (Mr. Banking Deregulation) as part of his campaign organization, and was smack in the middle of the last financial collapse and massive bailout (the Savings & Loan disaster, starring Charles Keating).
700 billion was intended to stabilize the credit market and not the Stock market(perhaps tangentially). And theoretically none of it has been spent yet.
could be worse.....could be Iceland.
http://www.guardian.co.uk/world/2008/oct/05/iceland.creditcrunch
The media are all reporting that the stock market plummeted DESPITE the $700,000,000,000 bailout.
Anybody else think it may be BECAUSE of the bailout?
Can't they just take the money and build the Bridge to Nowhere? It would be better spent there. But Tina Fey would say: "Thanks but no thanks, you betcha doggone sure as shootin' yaheydere."
reply @15:
Yea, that's what I'm talking about. It all coming down. Revolution. The end of unsustainable growth. This is what the species coming into balance looks like. Nothing like a depression to cut your carbon footprint.
CNN told me Russia's market closed down 19% (but they didn't give a time period). I'm glad I keep my money in the bank, not in the market.
@24:
That sounds cool and all, but if energy alternatives need to be developed and we don't have the money to invest in developing them, won't conservation fall by the wayside as a long-term goal? Will people really react to economic crisis by becoming level-headed and calmly realizing their former mistakes? That seems unlikely.
@26:
The stage is set for a new Roosevelt and Kennedy all rolled into one. Hopefully Obama will live up to the level of greatness we need. We need 1/2 trillion pumped into alternative energy, not Wall Street (or maybe that too).
Neither "confidence" nor "greed" have anything to do with it.
Even Bill Clinton, on the Sept. 23rd episode of the Daily Show, admitted that the problem was an oversupply of credit after the dot-com (ala Alan Greenspan's artificially low interest rates).
Instead of raising interest rates to contract the credit, Bush et. al. in 2001 funned the excessive credit into housing construction, which caused the sub-prime mortgage crisis... and from there the story is pretty well known by now.
But the salient point to take from all this is that expansion of the money supply causes the business cycle. The "credit crunch" was the system trying to right itself... like vomiting when you've eaten rancid food...
Only the problem now is that $850 billion in new credit has just been added to the money supply, in addition to the $1 trillion already dumped into it for the Iraq war. Furthermore, total estimates for the Iraq war are closer to totaling to $3 trillion, same goes for the Wall Street bailout -- another $3 trillion. $6 trillion added to the money supply!
Anyone care to guess what the collapse of that $6 trillion bubble will be, if all we were feeling before was the correction from the housing asset bubble?!?!
Additionally, the USD is a reserve currency, making the situation that much worse, because people will dump their bad dollars revealing inflation that much more.
We are doomed.
The bailout was the death knell, after we were already crippled from the Iraq war debt.
I realize it won't come to pass now that our leaders have committed to the bailout of Wall Street, but can someone help me understand why the government couldn't have bought up all the bad loans themselves rather than the derivatives of them?
Our current approach seems like treating cancer with anti-inflammatories, whereas buying the actual bad loans would have been more like excising it.
hmmm open thread ?
Aye right.
And they say you can't a negative from a double positive.
No, Zuzu @28, I don't believe that ancient astronauts built the pyramids.
Error404, you can make a negative from some double positives, but it's not an algebraic rule.
When you really understand how credit default swaps work, you then understand how doomed it all is. We're in the financial equivalent to the last five minutes of "Dr Strangelove"; they are the doomsday device.
I don't think one particular person, placed into the white house, will magically fix this problem.
It is multi-faceted, and much of it is simply legally out of the reach of the Chief Executive.
What is needed is a good team.
One of these candidates knows we need a good team.
One of these candidates supports consolidating authority and power.
Don't allow yourselves to succumb to the cognitive bias of post-purchase rationalization for the bailout. In reality, the bailout only set us up for an even more massive crash later. Fuck you very much, Congress.
In Bill Clinton's own words:
(emphasis added)The Federal Reserve should have raised interest rates and contracted the credit then.
David Guerrero: WE CANNOT ALLOW A CREDIT-DEFAULT SWAP GAP!
... Betting on who it will be that stands up and shouts "MEIN FUHRER! I CAN WALK!" opens at - aw, crap ... "Sen. Obama has accused me of opposing regulation to avert this crisis. I guess he believes if a lie is big enough and repeated often enough it will be believed."
50 to one against Gramm.
It's not about how they fix the problem. It's about what they do with the pieces they pick up. The same old thing? or move to transform how we behave as a society and a species?
“All the perplexities, confusion and distress in America arise not from defects in the constitution or confederation, nor from a want of honor or virtue so much as from downright ignorance of the nature of coin, credit and circulation”
John Adams in a letter to Thomas Jefferson, 1787
So the same morons that brought us the wall street bailout can run those industries as well? No thanks.
Nobody has blamed Democrats yet, so let me be the first... this is bipartisan fail, and Clinton is as much to blame as his predecessors. Obama is of like mind with John McCain in this (or rather, their advisors are of like mind) as far as the big picture goes.
Just remember Margaret Thatcher's fateful words... TINA. There is no Alternative. (Unless, of course, she was lying or mistaken...)
Bipartisan fail.
David, transformation if we're lucky. But it's going to be hard, and it won't be a lot of fun. The invisible hand of the marketplace is not to human scale. There are hardworking people out there who've done everything they've been told was right, and are going to get screwed just the same.
Sure, the economy's been pumped full of air. The Bush administration has been grossly fiscally irresponsible, and have covered it by inflating the currency. I'm sure they thought they could stave off the crash until after they were out of office.
I'm just sitting here waiting for my fellow Cascadian Seperatists to give me the high-sign.
1UpMushroom, not the same morons. Their industry doesn't exist anymore. They're gone.
@ 37: YOU'RE RAD!
McCain is definitely George C Scott. Hopefully Obama is no one in the movie, but he might be a President Merkin Muffley. I think Greenspan would be Strangelove, YEAH! Pelosi is the Russian Ambassador. And Bush is Premier KISSOFF.
@43: Yeah, maybe we'll have to start living like everyone else in the world.
So what do I do?
No, really, someone give me a cogent answer to that. Stop throwing huge numbers at me and pulling out the thesaurus to find new words for catastrophe (cataclysm and holocaust are two I haven't heard yet...yet) and give me some 'straight talk'.
Jim Cramer is telling us to jump out windows, but he's a nutter. Warren Buffett is making with the fear talk as well.
Look, I'm a librarian. I make a lower-middle class income, I don't have a mountain of debt or an extravegent lifestyle. I haven't bought a home, but I'd like to someday. I didn't take out huge loans or run up tens of thousands in credit card bills. I don't buy a lot of crap I don't need. I bike, I use public transit. What can I do? More 'off the grid' moves? More austerity? All this doom talk/fear speak makes my teeth ache. I'm in my 20's, I'm not defeated or tossing in the towel for decades of poverty, doom and despair. It's a mocked cliche these days, but I have hope.
So I ask, smart people, what can we do in the face of all this?
And don't just say "Nothing, we're screwed" peddle those papers elsewhere please.
You'll need to defend such a cosmic statement.
If you mean the excessive reliance of most everyone on credit rather than savings, that's the fault of the central banking system / Federal Reserve. People were indeed given forged market signals about what they should do and acted accordingly; the problem is with the signal spoofers.However, to quote a Houseism:
Brown Monday... How fitting. Did you wear barn boots, go for the knee highs, choose the hip waders, take extra time and don the chest waders? Personally, I would look for a hazmat capable dry scuba suit with plenty of spare tanks.
So, the Investors are: protecting themselves by buying credit-default swaps — a financial insurance policy against potential bankruptcy — at prices 30 times what they normally would pay.
Credit Default Swaps are pseudo insurance premiums collected with no guarantee that the person you gave the premium actually kept any of it around to help pay you off if your insured debt goes bad. Too much imaginary money and imaginary assets are still being traded around for my liking. There's $65+ Trillion of this floating around out there as a liability.
MGFarrelly, exchange any wealth you have held in dollars or dollar-valued assets and ideally get them into stable commodities, or at least other fiat currencies that aren't the USD or that rely heavily on the USD for its basket valuation.
I won't be so cliche as to say "buy gold", but it's pretty close to that.
It's looking alot like this already.
Or, just ask the people living in Zimbabwe how they feel about using the money printing press to get out of their financial jams.
MGFARRELLY @ #48:
Even if it gets really, really, bad there will still be jobs. Continue to live frugally, and if you lose your job, try to find another one-- you can type and file, you could chop wood if you had to in order to eat, etc.
It seems that, like me, you're young and healthy, and you don't have too many dependents.
It also seems that, like me, you don't have too much money to risk on investments... so don't put your money into anything you don't understand (like trying to make money off of the stock market, or make money on gold.)
#44 these are your orders
execute Wing Attack Plan R,
Set your scrambler code to OPE,
I am on my way to help the glorious revolution,
Ye-Haw Ye-Haw!
#48 Move to Portland Seattle, or Vancouver BC and join the fight. But really the British survived becoming a second rate power, so will the US but it will probably involve a world war or so.
"MGFarrelly, exchange any wealth you have held in dollars or dollar-valued assets and ideally get them into stable commodities, or at least other fiat currencies that aren't the USD or that rely heavily on the USD for its basket valuation.
...
Or, just ask the people living in Zimbabwe how they feel about using the money printing press to get out of their financial jams."
From his self-description, Zulu, it doesn't sound like he has a lot of assets or debt. Advising him to invest beyond his level of comprehension may not be the best of advice-- but so long as he is in the same boat as a lot of other people, and the government doesn't want riots (big riots that end with fifty hammer-and-sickles on a red-yellow-and-blue flag), he'll have bread and shelter and something semi-worthwhile to occupy his time, worst case.
BDEWhirst, indeed, though what I said could have been as simple as "I have $10,000 in a savings account." better change those to Euros or gold or oil or something that isn't dollars, except for whatever petty cash needed to get by for regular expenses.
@48: Relax. What's the worst that happens? It doesn't sound like you have much to loose. Really, what's the worst that happens with any of this to any of us? We loose our jobs? We're poor? There are worse things in life than being poor. What we need to do is make sure it's not in vein, and that happens politically. We are at a point in history where literally THE FATE OF THE SPECIES is in the balance based on our actions.
WE NEED TO CONSUME LESS. WE ARE NOT GOING TO HAVE THE SAME STANDARD OF LIVING THAT WE ONCE DID, OR EVEN OUR PARENTS HAD. THIS IS NECESSARY FOR US TO SURVIVE ON THIS PLANET.
This is just the beginning of that process. For us to not get too depressed about this, a mass transformation of consciousness is required.
Zulu, what makes you so confident the Euro will hold out? That, should things get really nasty, owning gold will remain legal?
#58 but we have a much bigger "English Channel" than they do.
The Blitz was just being neighborly?
@Zuzu:
Sorry, you wrote We Are Doomed and then went on to mangle Eric Blair's work. Thanks, but I'm not gonna bite.
I think things are rough, they've been rough for a long damn while for many people. What gets to me is the almost, god, is the almost gleeful tone to some people about this. Like Climate Change or terrorism or any other awful and huge set of circumstances, people seem to be almost getting off on the nosedive, especially if it confirms some of their more deeply held political/philosophical beliefs.
I'm not just trying to save myself here, I'm relatively young and healthy, I have marketable skills and a decent grasp on DIY tactics. I'm talking about what can WE do to make it better for ALL? I don't want to just survive, I want to help everyone I can to thrive damn it!
Sorry if I sound hopelessly polly-anna here, but I'm a contrarian and the death knoll of western civ. tolling is getting a bit thick.
@#18
Underpants Gnomes Business Plan sounds great! People always need underpants. Where do I sign up?
@ #48
You are young enough to ride this out. If you have stocks or any type of retirement plan invested in stocks, LEAVE IT ALONE, don't panic. The market will come back. It will be slow and agonizing for someone close to retirement, but you can wait. You weren't going to spend that money now without taking a big hit from Uncle Sam anyway.
I speak as someone who survived the crash of '87 and the downturn of 2001 BEFORE 9/11. I have regained most of the value in my IRA although I dread looking at the statement that is yet to come for this quarter.
-Carrie
As far as making private ownership of gold illegal as it was in the Great Depression... that's a good argument (among several) against owning gold certificates rather than the physical gold itself.
the current economic woes look a lot like what my 96-year-old grandmother still calls "the real Great Depression." She pinched pennies in the 1930s, but she says that times were not nearly so bad as the depression her grandparents went through. That crash came in 1873 and lasted more than four years. It looks much more like our current crisis.
http://chronicle.com/temp/reprint.php?id=477k3d8mh2wmtpc4b6h07p4hy9z83x18
So far (9 minutes in), the TAL story is the cleanest summary of the situation I've heard. No agenda. No editorializing. Worth a read.
Oh Zuzu still beating the inflation drum while housing and oil and other commodities fall in US dollar terms?
Or as the rush to safety, from equities to US Treasuries, drives up the value of the US dollar vis-a-vis other currencies?
Deflation will be the problem, and has been for a long time, neither the inflation of the War or the oil-speculation "inflation" has helped, deflation brought about by the advances in info processing and automation will continue.
There has never in history been an inflation while house prices have fallen.
We can do so much, so much cheaply than before, that prices are coming down, but it is manifesting in the equity markets/housing markets first, soon to come to a factory and store near you.
Others can say this better than I:
http://benbittrolff.blogspot.com/
The solution to this is to work harder, and to love more.
Just as it was for the problems of society at the time of Thoreau and Emerson.
Good luck to all, and to all a good night.
Bah. insert "more" after the second "much" in the fifth last sentence in my previous comment.
PS Zuzu, the financial wizards would rather there be inflation, than deflation, but I don't think they can pull it off. We'll see, but if the War spending and the oil price spike did not do it, well...I actually hope they succeed. Maybe the bail-out spending will be "third time lucky". Then maybe I could get a raise...which in a deflation would not be likely at all.
I think the song "Cotton" by The Mountain Goats sums up my feelings about the economy quite nicely. Here is a link to a video featuring the song, and the lyrics.
http://www.youtube.com/watch?v=mZTslh_e2iE
This song is for the rats
Who hurled themselves into the ocean
When they saw that the explosives in the cargo hold
Were just about to blow
This song is for the soil
That's toxic clear down to the bedrock
Where no thing of consequence can grow
Drop your seeds there, let them go
Let them go
Let them all go
Let 'em all go
This song is for the people
Who tell their families that they're sorry
For things they can't and won't feel sorry for
And once there was a desk
And now it's in a storage locker somewhere
And this song is for the stick pins and the cottons
I left in the top drawer
Let 'em all go
Let 'em all go
I wanna sing one for the cars
That are right now headed silent down the highway
And it's dark and there is nobody driving
And something has got to give
I saw you waiting by the roadside
You didn't know that I was watching
Now you know
Let it all go
Let 'em all go
Let it all go
red gummy bear are happy for this
http://flickr.com/photos/e-coli/2919452693/
Zuzu, government failure? The only mistake the government made was not to regulate. It's the bankers and traders who built a house out of structural timbers made of dynamite, who considered the right thing to do when you have a house with a pile of crap on the floor is to sweep it to a part of the floor owned by someone else and pretend it's gone, who didn't want to think of the problems with a totally opaque market while they were making money out of it, so that many of those dynamite structural timbers passed back through the same point dozens of times...
So, yes, it's government failure, in much the same way as a town with a soaring murder rate is police failure. In that situation, one tends to blame the murderers first.
This forum needs a "reply to comment feature".
@#11 RedShirt77
Nationalizing the auto industry is a surefire way to make sure the car you currently drive holds its value for a very very long time.
Wait... what's a Ford Nova?
You got it Nix, criminal failure of the GWB Admin. to regulate their very supportive friends on Wall Street.
First , Bush's military contractor buddies get fat on iraqi blood, leading to his oil buddies getting rich on the subsequent price spike in oil (aided by manipulation in the futures Market) and lastly his Wall Street buds get their gifts. All from the pockets of the American middle-class taxpayer.
Watch them cut taxes on the wealthy to make things "better".
A criminal Presidency.
Vote Republican! Four more years!
The TAL episode is terrific. It is the clearest most comprehensive explanation I've heard yet, and answered several questions I had about the situation. Highly recommend it.
I think I'm going to go cry now.
Nix, failure to regulate... only looks at half of the equation. Yes, Phil Gramm partially deregulating so investment banks could leverage at 40:1 instead of the usual 12:1 certainly contributed significantly to the problem. But it didn't start there. Read again the quote I pasted from Bill Clinton; even he knows (because he was President at the time) that the problem traces to the fiat currency system itself and that the Federal Reserve expanded the money supply with cheap credit (i.e. low interest rates) during the dot-com bubble that when it burst got funneled into housing during the G.W. Bush administration, instead of raising interest rates and contracting the oversupply of credit.
So, while I agree that "failure to regulate" in the sense of half-assed deregulation is (clearly) disastrous. But that kind of insane leveraging wouldn't be possible if it were constrained by a backed currency (e.g. gold standard) instead of a fiat ("out of nothing") currency. (Not to mention if these banks weren't counting on the government to bail them out when shit hit the fan -- i.e. moral hazard.)
Spend the 7 hours listening to the audio book of Economics in One Lesson if you want to understand both "what is seen, and what is unseen" in economic systems, and thus where the fault originates in this crisis.
It is the government's fault. It's not corporations' obligation to act in a way that is responsible in the long term for themselves or for us. It is their sole aim, by law, to maximize their profits each quarter. We have government to look out for our interests and collective goals, and it is a failure of government and a misunderstanding of our leaders' roles that lead to this. Don't blame the sharks, blame the asshole that's been chumming for eight years and then threw you in the water.
What swampdog@75 said, I con-cur.
How can you blame anybody for this crisis?
I mean, just look at their shiny little faces, beaming with hope.
@ SeattlePete
"I'm just sitting here waiting for my fellow Cascadian Seperatists to give me the high-sign."
Portland sez "The black dog barks at midnight"...
@ ZUZU
I just want to say that you are the only voice of reason here in this space. I admire your persistence in the face of widespread ignorance and open hostility. Keep up the good work!
@#73 posted by assumetehposition
I drive a Subaru so my car's value is pretty much certain to stay high until the internal combustion engine is replaced.
Is there anything that could make the value of the big three's worth fall faster then their current leadership.
And sorry, Chevy NOVA, I was doing my best to point to an obsolete hunk of rusty steel and figured Ford must have made it.
Agreed on the reply to comment function.
If you're in your 20's, you'll figure it out. It may be uncomfortable, but you'll be fine. What you need to worry about is family and friends a generation or more older than you.
As for real, practical advice . . . buy gold, and stock up on canned food and clean water and the kinds of things you'd need if a natural disaster hit. It's hard to imagine it getting as bad as Argentina, but it's also hard to imagine it having gotten this bad already.
All day I've been reading everyone's view on who's fault this is. And while I do believe that the people/organizations that are responsible should be held accountable, I think we really need to think about exactly WHAT we're going to do (or at least plan for).
Obviously we're powerless to affect the bailout bill (and the ridiculous notion of having pork project earmarks in such a thing). And to me the whole survivalist impulse, while understandable, is essentially avoiding dealing with the greater problem.
What if we wake up tomorrow and all our fiat scrip is suddenly gone? Stockpile, grab a gun, and fuck everyone else? Not really a sound long-term strategy if you ask me.
While we may not get totally reamed by the Fed with this bailout, I think this whole scenario should be evidence enough that we can't depend on them.
Essentially we have to create our own solutions outside of the Federal and Corporate structures. And I think a good start would be to take Rushkoff's advice and look into what it takes to create viable local/complementary currency.
Further interesting ideas on alternatives to the current economy can be found in this article by Robert Anton Wilson:
http://www.whywork.org/rethinking/whywork/rawilson.html
Oh, Zuzu, the gold standard. Oh dear oh dear.
Your claim that gold-backed currency is not indefinitely inflatable is obvious hogwash, disproved by *five-century old* history (look at the Spanish Empire when they got all that nice American gold). What it is is expandable by the gold miners, as they dig up more, and by the government, as they can change the amount of gold that equals one currency unit whenever they want to. All you've done is added a crude and hard to control abstraction layer on top of the existing system.
Also, a huge problem with the system right now isn't the *real* money, fiat or no. It's the *notional* money that people have promised to pay people should CDSes go bad, which *they don't have*. Backing a currency with physical objects doesn't help a bit if people then go and promise other people lots of money that they don't have, in such quantities that there is twenty times as much washing around as there is real money in the form of debt (inasmuch as one can define negative money on the stock market as 'real').
We had enormous stockmarket crashes when the whole world was on the gold standard. It *doesn't help*.
Zuzu (you'll forgive me in advance, I hope, if I misinterpret your libertarian positions): what we have now is a corporate-government system that functions to siphon money upward from the lower and middle classes to the upper class.
Knock the government out of the equation and go back to the gold standard, and what we'll have is a corporate system siphoning money upward from the lower and middle classes.
How about a more direct form of democracy that lets people make more of the decisions about their economic future, rather than leaving it to elected representatives or the unelected corporate entities that REALLY make all the power decisions in our society?
How about an economic democracy that stops pretending financial might makes right, and that economic power gives someone a god-given right to rule (Argent et Mon Droit!).
One that stops pretending that taking economic (and therefore political) power out of the hands of the boards of a handful of international and national corporations is somehow Communism or Fascism?
Zuzu, be of good cheer. Our politicians are working hard (well, sort of hard) to turn back the clock to the Gilded Age. Yay! Gold standard! No Federal Reserve! No unions! No minimum wage! No social safety net! No government oversight! A shrunken federal government that bows to states' rights! All market, all money, all the time!
Our elected officials may be under the impression that they will share power with our corporate overlords, but they will not. They will be their lackies. "There is only one Dark Lord, and he does not share power!"
Ugly Canuck, this is most certainly not a GWB-only problem, as the _This American Life_ program makes clear (much though I'd like to blame everything on GWB and say oh! that fixes it! that only causes problems once he's gone and we *still* have the problems to solve). It long predates GWB. Hell, it predates Clinton to some extent. Everyone who properly understood how this could go bad and had the power to stop it was making heaps of money off it so didn't want to. Boy are their faces red.
The revolution will not be subsidized. Or televised.
yes nix you are right, I get carried away, GWB has been so very murderous and bad, it's easy to blame him or his cronies, though I can't help but notice the "blame-the-victim" meme coming from the US Right ie blaming Carter's anti-"red line" Bank Rules. Sheesh!
If they are extreme and stupid, maybe I can balance it with some extreme stupidity from the opposite Bench. Fire with fire, eh?
@#58- come back and add more comments after your first roving gang home assault and raping and let me know how it feels when EVERYBODY is poor.
@90:
Like all those home invasions during the depression, right? Someone's watched Mad Max a few too many times.
Nick D, simply put, don't conflate Free Markets (which includes everyone) with Corporatism (i.e. the government-business partnership, that screws over everyone not invited to the table).
Free Markets are peer-to-peer distributed, like the Internet.
Corporatism is like mass-media, where the FCC (i.e. government) decides who's a player (e.g. Rupert Murdoch, ClearChannel, Ted Turner, et. al.) and who isn't (i.e. everyone else stuck consuming that tripe).
Furthermore, let's remember that charters of incorporation are a government-granted privilege (for personhood, for limited-liability, etc.)
Let's also remember that only both-benefit trade creates wealth. It's all of that transfer of wealth in the form of taxes, or inflation, or subsidies, or other forms of government-granted privilege (e.g. permits, patents, etc.), which does the syphoning.
But there in lies the symbiosis of the government-business partnership... government can't create wealth, it can only transfer it, so government needs some business to leech from, but the government can deputize the largest corporations as "tax collectors" to syphon from everyone else and let them keep something extra for themselves in the process. (c.f. Feudalism, military-industrial complex)
I think the real question of the economy is to wonder if we are all playing wile coyote standing just past the edge of a cliff looking down at our feet.
Something to consider:
http://chronicle.com/temp/reprint.ph...h07p4hy9z83x18
The Panic of 1873
1) Followed a period of post Civil War economic overexpansion
2) The Black Friday panic of 1869
3) The Chicago fire of 1871
4) The outbreak of equine influenza in 1872
5) The demonetization of silver in 1873
VS.
Sub-Prime Crisis of 2008
1) Follows a period of post World War 2 economic overexpansion
2) The Tech-Bubble Burst of 1999
3) September 11, 2001
4) Inflated gas pricing
5) ??? THE BAILOUT BILL ???
First of all.
With extractive commodities caculations there is a very important concept to keep in mind. The known reserves only include what is extractable given a certain price. Eg at $300(2008 values) per barrel for oil there are about 15 000 000 000 000 barrels (this includes alternative sources such as oil shales,coal conversions etc.)
Re: Peak gold - All the gold that is out there has not been discovered. Moreover all the known gold has not been mined. By a Loooong shot. The Witswatersrand basin in South Africa has a ~ 1 billion ounces in reserves ( but not economic to mine due to fuel, and depth).
Secondly.
Money is backed by debt. The fed sells debt to everyone and pays a yeild out of taxes. If the economy is strong more debt can be supported and more money can be printed without devaluing the currency. However there are cases supply of money outstrips the growth of the economy and hence the currency is devalued. In the case of Zimbabwe there is no economy, and no debt can be supported yet they still print money. Hence you get inflation in the order of 1000's%.
Purly, Civil War to Panic of 1873 = 8 years, while WW2 to current problems = 63 years. Kind of a spurious comparison, I believe. (Trying a little too hard to find a pattern.)
^^DCULBERSON There are more recent examples of wars.
Dculberson, here's the real comparison:
1) Quickly growing economy
2) Market panic that rebounded in recent memory
3) A bit of disaster strikes
4) Transportation becomes difficult
5) Government messes with our money