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Saturday, November 22, 2008

does it float

Fallen bull statue in Wall Street

"Nothing's unthinkable in this market, not even the idea that you can tie two rocks together and hope that they float."
-Felix Salmon


The forecast is beyond pessimistic:


I didn't understand half this article on the economic collapse (ok, three-quarters), but I still found it utterly fascinating. Basically it's about a few people who saw all this coming from a long way off. They had reconciled themselves to being considered crazy, and half-wondered if they really were, until the day they were proven spectacularly right.


I learned a new word yesterday:
in·ter·reg·num           Listen to the pronunciation of interregnum
Pronunciation: \ˌin-tə-ˈreg-nəm\
Function: noun
Inflected Form(s): plural in·ter·reg·nums or in·ter·reg·na           Listen to the pronunciation of interregna \-nə\
Etymology: Latin, from inter- + regnum reign — more at reign
Date: 1590
1 : the time during which a throne is vacant between two successive reigns or regimes
: a period during which the normal functions of government or control are suspended

: a lapse or pause in a continuous series

Judith Warner used it during an interview and I had to look it up. What made me curious was that she said (paraphrasing) "during this interregnum, in which we are between presidents and no one is in charge, is there any way to confront these economic problems." Which made me think, "wait... we're not in between presidents!" For better or for worse (ok, worse) George Bush is still president. I thought that was a weird thing to say, although it speaks volumes about where we're at right now.


The word shows up again in Krugman's latest column, in a similar context:

Everyone’s talking about a new New Deal, for obvious reasons. In 2008, as in 1932, a long era of Republican political dominance came to an end in the face of an economic and financial crisis that, in voters’ minds, both discredited the G.O.P.’s free-market ideology and undermined its claims of competence. And for those on the progressive side of the political spectrum, these are hopeful times.

There is, however, another and more disturbing parallel between 2008 and 1932 — namely, the emergence of a power vacuum at the height of the crisis. The interregnum of 1932-1933, the long stretch between the election and the actual transfer of power, was disastrous for the U.S. economy, at least in part because the outgoing administration had no credibility, the incoming administration had no authority and the ideological chasm between the two sides was too great to allow concerted action. And the same thing is happening now.

It’s true that the interregnum will be shorter this time: F.D.R. wasn’t inaugurated until March; Barack Obama will move into the White House on Jan. 20. But crises move faster these days.

How much can go wrong in the two months before Mr. Obama takes the oath of office? The answer, unfortunately, is: a lot. Consider how much darker the economic picture has grown since the failure of Lehman Brothers, which took place just over two months ago. And the pace of deterioration seems to be accelerating.

Most obviously, we’re in the midst of the worst stock market crash since the Great Depression: the Standard & Poor’s 500-stock index has now fallen more than 50 percent from its peak. Other indicators are arguably even more disturbing: unemployment claims are surging, manufacturing production is plunging, interest rates on corporate bonds — which reflect investor fears of default — are soaring, which will almost surely lead to a sharp fall in business spending. The prospects for the economy look much grimmer now than they did as little as a week or two ago.

Yet economic policy, rather than responding to the threat, seems to have gone on vacation. In particular, panic has returned to the credit markets, yet no new rescue plan is in sight. On the contrary, Henry Paulson, the Treasury secretary, has announced that he won’t even go back to Congress for the second half of the $700 billion already approved for financial bailouts. And financial aid for the beleaguered auto industry is being stalled by a political standoff.

How much should we worry about what looks like two months of policy drift? At minimum, the next two months will inflict serious pain on hundreds of thousands of Americans, who will lose their jobs, their homes, or both. What’s really troubling, however, is the possibility that some of the damage being done right now will be irreversible.


So what to do?

Dean Baker:

We know how to keep the economy from collapsing. We didn't have this information 80 years ago. The secret is to spend money, lots of it.


Fortunately, Obama gets this:



Unfortunately he doesn't take office until January 20th.

Gail Collins:

Thanksgiving is next week, and President Bush could make it a really special holiday by resigning.


hear, hear.

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