Wednesday, February 24, 2010

Greenspan: crisis worse than Great Depression

From Bloomberg:

"The world economy has undergone “by far the greatest financial crisis globally ever,” Greenspan said today
. . .
Greenspan said that while the economy was in worse shape in the Great Depression, the recent financial crisis was potentially more harmful than that in the 1930s because “never had short-term credit literally withdrawn.”

Martin Wolf is rather apocalyptic in the FT today, too.

"We can identify two alternatives: success and failure. By “success”, I mean reignition of the credit engine in high-income deficit countries. So private sector spending surges anew, fiscal deficits shrink and the economy appears to being going back to normal, at last. By “failure” I mean that the deleveraging continues, private spending fails to pick up with any real vigour and fiscal deficits remain far bigger, for far longer, than almost anybody now dares to imagine. This would be post-bubble Japan on a far wider scale.

Unhappily, the result of what I call success would probably be a still bigger financial crisis in future."

Greenspan's successor, Ben Bernanke, had something even more startling to say, however.

"The U.S. economy ceased to function this week after unexpected existential remarks by Federal Reserve chairman Ben Bernanke shocked Americans into realizing that money is, in fact, just a meaningless and intangible social construct.
. . .
"Though raising interest rates is unlikely at the moment, the Fed will of course act appropriately if we…if we…" said Bernanke, who then paused for a moment, looked down at his prepared statement, and shook his head in utter disbelief. "You know what? It doesn't matter. None of this—this so-called 'money'—really matters at all."
. . .
According to witnesses, Finance Committee members sat in thunderstruck silence for several moments until Sen. Orrin Hatch (R-UT) finally shouted out, "Oh my God, he's right. It's all a mirage. All of it—the money, our whole economy—it's all a lie!"

Screams then filled the Senate Chamber as lawmakers and members of the press ran for the exits, leaving in their wake aisles littered with the remains of torn currency."

The Onion is still going strong. Let's hope the global economy finds some way to keep going.


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