On Oct 1, 2008, at 11:57 AM, Doug Henwood wrote:
On Oct 1, 2008, at 11:45 AM, Jim Devine quoted Dean Baker:
The weakness of the banks contributes to the downturn, but they are
not the core of the problem. We would still be facing a recession
even
if all our banks were flush with cash. Hence the hype about the
urgency of the bailout was an invention.
This really gives me pause. The financial system is imploding, and
is in desperate need of recapitalization. One of the things that
turns a recession into a depression is a cascading wave of bank
failures and a contraction of credit. (This is something that
Bernanke knows a lot about.) Intervention has to be quick or it will
be too late. The longer-term stuff is very important, but unless you
want to take the risk of a severe implosion (and I know there are
some who want to do that), saying stuff like this isn't very
helpful. Besides, the history of banking crises and interventions
around the world shows that the longer you wait, the more expensive
the bailout becomes, and the worse the economic damage.
Oddly, Dean then moves on to accept the need for equity injections.
So why this bit?
[Spalindrone alert (*)]
Accepting the need for equity injection, in itself does not contradict
the first claim that the calls for urgency are a bogus invention. The
critique of that claim ("urgency is bogus") is your first paragraph
which offers a view on what would happen if the bailout isn't
immediate. Yes?
My own worry is that in our fears of a depression, are we losing a
genuine moment for the people to return sanity into the way we talk
and act? I think Dean Baker says similar things within the quoted
material. That depends, I think, on how bad a crisis the middle and
poorer classes are, already. With a negative savings rate, an average
net worth of at best $150k (recalled from vague memory of census
data), growing unemployment and few job prospects, while at the same
time the burden of current and future healthcare or college tuition
costs, do people in these categories gain much in the avoidance of a
depression in comparison to what they could possibly achieve at this
moment?
I am aware of the argument that radical positive change doesn't often
happen at a moment of crisis -- when the people are down and out they
are in no mood for such things. But I also feel that I should not be
in the business of [second] guessing "what the people want".
--ravi
(*) A new term I am trying to popularise that describes someone out of
their depth muttering marginally relevant cliches or utter inanities
in the midst of or in response to a serious discussion.
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