Links - Dec 10
What to Do
Dec (NY Review of Books, By Paul Krugman) - Anything that has to be rescued during a financial crisis, because it plays an essential role in the financial mechanism, should be regulated when there isn't a crisis so that it doesn't take excessive risks. Now we've seen a wide range of non-bank institutions create what amounts to a banking crisis, comparable regulation has to be extended to a much larger part of the system. In the aftermath of the Asian crisis of the 1990s, there were some calls for long-term restrictions on international capital flows, not just temporary controls in times of crisis. For the most part these calls were rejected in favor of a strategy of building up large foreign exchange reserves to stave off future crises. Now it seems that this strategy didn't work.
Jan 09 (Vanity Fair) - Joseph Stiglitz' choice of culprits for the mess: 1. Replacing Volcker with Greenspan at the Federal Reserve ("If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll get,"); 2. Deregulation ("The most important consequence of the repeal of Glass-Steagall was indirect—it lay in the way repeal changed an entire culture."); 3. The Bush tax cuts ("The president and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease—the modern-day equivalent of leeches"); 4. Faking the Numbers ("The scandals had involved every major American accounting firm, most of our banks, and some of our premier companies, and made it clear that we had serious problems with our accounting system"); 5. Not acting fast enough ("Both the administration and the Fed had long been driven by wishful thinking, hoping that the bad news was just a blip, and that a return to growth was just around the corner.")
Why Wait to Repeal Tax Cuts for the Rich?
Dec 9 (NY Times) ON the campaign trail, Barack Obama said he wanted to eliminate the Bush tax cuts for top earners upon taking office in January. Now he seems to favor letting those cuts expire as scheduled, at the end of 2010. The added revenue from eliminating the Bush tax cuts would pay for larger temporary tax cuts for low- and middle-income families than the permanent ones now planned. Following our recent blog on this.
Recession-Plagued Nation Demands New Bubble To Invest In
What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future. From the satirical magazine The Onion. See also: Dollar Bill On Floor Sends Wall Street Into Frenzy