PAUL KRUGMAN: Very Scary Things

[kevinmc]

In September 1998, the collapse of Long Term Capital Management, a giant hedge fund, led to a meltdown in the financial markets similar, in some ways, to what’s happening now. During the crisis in ’98, I attended a closed-door briefing given by a senior Federal Reserve official, who laid out the grim state of the markets. “What can we do about it?” asked one participant. “Pray,” replied the Fed official.

Our prayers were answered. The Fed coordinated a rescue for L.T.C.M., while Robert Rubin, the Treasury secretary at the time, and Alan Greenspan, who was the Fed chairman, assured investors that everything would be all right. And the panic subsided.

Yesterday, President Bush, showing off his M.B.A. vocabulary, similarly tried to reassure the markets. But Mr. Bush is, let’s say, a bit lacking in credibility. On the other hand, it’s not clear that anyone could do the trick: right now we’re suffering from a serious shortage of saviors. And that’s too bad, because we might need one.

What’s been happening in financial markets over the past few days is something that truly scares monetary economists: liquidity has dried up. That is, markets in stuff that is normally traded all the time — in particular, financial instruments backed by home mortgages — have shut down because there are no buyers.

This could turn out to be nothing more than a brief scare. At worst, however, it could cause a chain reaction of debt defaults.......

http://freedemocracy.blogspot.com/2007/08/paul-krugman-very-scary-things.html

[pansypoo53219]

1. well, isn't that special

they made their bed annointing the chimp. now they gotta sleep with him.

HA HA!

[tbyg52]

2. Liquidity has dried up

This scares me a lot. I hope somebody smart and with some power/influence will get in there and prime the pump, if such a thing is still possible. I've been expecting a new Great Depression for quite a while, but would be happy to continue to be disappointed.

(Disclaimer--I am not a financial expert of any sort, just a worried citizen.)

[jtrockville]

3. I'm just a worried citizen too, and here's why:

Certainly I'm no economist, and really, I can't even pretend to understand the financial market, but when I hear things like: "Savings haven't been this low since before the Great Depression", and "Home foreclosures haven't been this high since before the Great Depression", I worry.

[tbyg52]

4. Exactly. nt

[MasonJar]

5. Yesterday the Federal Reserve pumped billions into the Stock Market

for liquidity. I do NOT understand any of this, but does that make a difference and where do these funds come from?

[Banned_Wagon]

6. They print more money...

therefore lowering the value of the American dollar even further.. We are now almost at par with the Canadian dollar, by 5 cents. 5 Years ago when I was in Canada our Dollar was worth 1.45 Canadian Dollars. Now it's only at 5 cents. And you would actually lose money transferring USD into the Euro currently.

This is screwed up. Watch for investors to start jumping from windows in the near future. Everything happening these days seems like the lead up to the last Great Depression. What the hell did everyone expect would happen in a 6 year war at a rate of $177M per day, $7.4M per hour and $122,820 per minute?

The longer the war lasts, and it will continue, the more this Country will fall under control of the Corporate Elite. And not only the Corporate Elite of America, but China and Saudi Arabia as well.

Question is this, How much longer will Americans slave for the Elite? IF you fear that missing one day to protest the wrong doings of our Leaders will break the bank, ask yourself what you will do when you totally lose your job, pension, insurance, social security, etc. etc?

Nationwide Strike Sept. 11, 2007. No Work, No School, No Shopping.
http://www.strike911.org/ Join Us! It will make a difference.

[Uncle Joe]

7. I agree with youir post

and welcome to D.U. Banned_Wagon.:hi:

[Banned_Wagon]

8. Well thanks...

Hopefully people will wake up soon.. I must admit, there are a lot more people awake now as compared to last year.. But we need many more. Like the whole damn Nation. :)

[ManWroteTheBible]

9. Don't forget about...

the tax cuts! Because the "boy genius king" has no sense of history, and no true understanding of economics (MBAs are obviously purchasable) he cuts taxes rather than raises them when he wages war(s) (history would have taught him that had he been born with a brain). I'm no economist but I understand this! Damn these people have totally fucked up this country! From record surplus to record deficit in record time! Heckuva job, Georgie-Boy!