The Looming Financial Holocaust
Since the bailout bill was passed a week and a half ago, the stock market has dropped like a bowling ball off the Sears Tower. The Dow is now at 9,000! One year ago today, the Dow stood at over 14,000. We seem to be on the brink of a global financial meltdown with no end in sight. In the past week the British and Irish governments intervened to prop up their banking systems. The Icelandic government took over its 3rd largest bank, Glitnir to avoid a collapse. Now there is word that a ''Global Financial Summit" has is being discussed to deal with the crisis.
Ordinarily I would be optimistic about America's ability to rebound from financial turmoil. After all, we have been through this before. There was the panic of 1907, the great depression from 1929 to the early 1940's, there was the Savings & Loan collapse of the mid 1980's, the stock market crash of 1987 and last but certainly not least the September 11Th terrorist attacks. Trading was halted after the attacks for nearly a week. When it resumed on September 17Th, the Dow dropped 684 points and a recession soon followed. Eventually we came out of all of these nail biters only to learn nothing from them. This latest global upheaval has a different ring to it-the international flow of funds seem to have ground to a screeching halt. Central bankers including our own Fed have pumped nearly 100bn into the banking system to add liquidity and facilitate lending-however as of yet it hasn't brought sexy back to the US financial sector.
It's times like these that lend themselves to demagoguery. Whereby a slick talking populist speaks to the economic pain of the masses and offers Utopian solutions...but I digress. The argument against the bailout on the right consist of those who fear a turn toward socialism-that Americans will feel an urge to learn Swedish. They argue that the market not government should work out the problem. I am not in total disagreement with that notion. However, there is a gross misunderstanding that America is and always has been a pure capitalist economy-since the 1940's we have been very much a mixed economy. Fortunately or unfortunately the great depression and FDR usherd in the era of the nanny state and liberals have been voting for him ever since.
The federal reserve was established in 1913 as a lender of last resort. It routinely intervenes in the foreign currency market to stabilize US dollars-buying or selling them when necessary. The right leaning libertarians, who wish to shrink the government to the size of a chickpea have smoke coming out of their collective ears about this bailout. Libertarian presidential candidate Wayne Allyn Root writes: "Soon all of America will be on welfare- the people, the biggest corporations, and now even the states themselves. We're just one big, happy, bankrupt family. Each side of the debate is just as passionate about their position on this issue as the other. It is said that there is a thin line between genius and insanity. We'll have to wait a couple of years to see which side of that line we're on.
Ordinarily I would be optimistic about America's ability to rebound from financial turmoil. After all, we have been through this before. There was the panic of 1907, the great depression from 1929 to the early 1940's, there was the Savings & Loan collapse of the mid 1980's, the stock market crash of 1987 and last but certainly not least the September 11Th terrorist attacks. Trading was halted after the attacks for nearly a week. When it resumed on September 17Th, the Dow dropped 684 points and a recession soon followed. Eventually we came out of all of these nail biters only to learn nothing from them. This latest global upheaval has a different ring to it-the international flow of funds seem to have ground to a screeching halt. Central bankers including our own Fed have pumped nearly 100bn into the banking system to add liquidity and facilitate lending-however as of yet it hasn't brought sexy back to the US financial sector.
It's times like these that lend themselves to demagoguery. Whereby a slick talking populist speaks to the economic pain of the masses and offers Utopian solutions...but I digress. The argument against the bailout on the right consist of those who fear a turn toward socialism-that Americans will feel an urge to learn Swedish. They argue that the market not government should work out the problem. I am not in total disagreement with that notion. However, there is a gross misunderstanding that America is and always has been a pure capitalist economy-since the 1940's we have been very much a mixed economy. Fortunately or unfortunately the great depression and FDR usherd in the era of the nanny state and liberals have been voting for him ever since.
The federal reserve was established in 1913 as a lender of last resort. It routinely intervenes in the foreign currency market to stabilize US dollars-buying or selling them when necessary. The right leaning libertarians, who wish to shrink the government to the size of a chickpea have smoke coming out of their collective ears about this bailout. Libertarian presidential candidate Wayne Allyn Root writes: "Soon all of America will be on welfare- the people, the biggest corporations, and now even the states themselves. We're just one big, happy, bankrupt family. Each side of the debate is just as passionate about their position on this issue as the other. It is said that there is a thin line between genius and insanity. We'll have to wait a couple of years to see which side of that line we're on.
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