Stephen King: Roosevelt's lesson... a decisive act to break the psychology of depression

I think that this is an excellent article concerning the Financial Crisis and what should be done:
www.independent.co.uk... 2587.html

What should you do if your banking system doesn't work? Some will doubtless celebrate, arguing that banks are the source of all monetary evil. Others will panic, worrying about the onset of another Great Depression. Policymakers, though, should do neither of these things. They need, instead, to find a way to make the financial system function again.

Banks, after all, are supposed to link the interests of savers and investors. They provide the glue which allows economies to allocate capital through time. Without banks – or some other form of financial intermediary – modern-day economies would implode. You've only got to go back to the Great Depression to see what happens when a banking system melts down.

Why is the system in such bad shape? Many reasons spring to mind, ranging from collapsing housing markets to pro-cyclical fair-value accounting and dodgy mortgage-backed securities, but it's the loss of trust which is the biggest single problem. Banks have a habit of lending to each other in the so-called interbank market. They'll do so, though, only if they're confident that they'll get their money back. Recently, trust has been in short supply. Banks circle each other suspiciously, unsure of the hidden dangers associated with lending to their counterparts. We're seeing a modern-day wholesale version of the bank run. It's not so much that customers are withdrawing their deposits (although, to a degree, they are). Instead, banks are simply refusing to lend to each other.

Arguably, matters have been made worse by policymakers who have adopted a piecemeal approach to bailouts. Lehman Brothers was allowed to fold but AIG was saved, leaving some stockholders penniless but others a bit better off. Washington Mutual's rescue left its creditors severely out of pocket, while, at the time of writing, Wachovia was to be sold either to Wells Fargo or, with the help of taxpayers' money, to Citibank. In the absence of systematic government policies, banks are finding themselves playing a game of financial Russian roulette.

Please read the entire article, and let me know whether you agree with his suggestions at the bottom of the article. They are too long to post here.

link's not workin brotha
interested in what SK has to say, unsure of how much he actually knows about economics but as an original voice he may have the ability to bring a new perspective

SK is not only one of my favorite authors, but many don't know he does quite a few blogs. His laser site of current affairs is no less to the mark. If anyone knows how to shake off the black dog SK does. That is how much respect I have for him.

I don't know what happened with the link.
I'm wondering if the length of the string of the url is exceeding the link mechanism on ATS.
I tried to paste it again, and it is lopping off the end.




[edit on 10-10-2008 by ProfEmeritus]

The only decisive act Roosevelt did to get us 'out of the depression' was to engineer America's entry into WWII. I fear the same tactics will be employed again with a far worse outcome. Beware the government meddlers!

Here are the recommendations at the end of the article:

If, though, this is the ultimate "do", what about the "don'ts"?

First, central banks should not defend their independence at all costs. This, after all, is what the Federal Reserve did during the Hoover administration at the beginning of the 1930s. The approach was a hopeless failure. During banking crises, central banks lose their power. To restore it, they need, and should ask for, fiscal help.

Second, each central bank should, ideally, speak with one voice. Better, in my view, to show strong leadership than to advertise publicly a collection of disparate views which can only sow the seeds of doubt throughout the financial system. After years of success in highlighting the nuances of the economic debate, we're now seeing the downside to the Bank of England's committee system.

Third, under no circumstances should countries resort to capital market protectionism. The Irish government's offer to underwrite deposits in Irish banks (and, hence, to protect the Irish banks' interests) is an unfortunate precedent (it would be far better if all countries were to offer deposit guarantees simultaneously, but that hasn't happened). It's reminiscent of the Smoot-Hawley tariff in 1930, designed to protect the interests of American exporters but, ultimately, a contributor to the subsequent collapse in world trade. Others were forced to launch their own "beggar-thy-neighbour" policies, contributing to a global economic collapse and, tragically, fanning the flames of fascism. We don't want to go down that route again.

Try this link.

Stephen King: Roosevelt's lesson... a decisive act to break the psychology of depression

So far Bush is following almost to the "t" what FDR did. Nationalize an entire sector (FDR nationalized industry Bush nationalized finance), pass taxpayer cash and through some shady deals cartelize or "regulate" the alleged cause of the troubles (FDR put the regulation of industry under the government/corporate cartel and Bush/Pelosi will be "regulating" finance under government and corporate cartels), ensure massive inflation (FDR confiscated gold and took us off the gold standard and made it a crime to privately own gold while simultaneously destroying produced goods to drive the prices of consumables up, Bush/Pelosi/the fed in general have run the dollar into the ground making it worth less than imaginary "credit"), give out handouts that encourage low employment and high labor costs (FDR did it with SS and his bunk New Deal policies and Bush began with those stupid rebates and will no doubt continue with some other inflated "social" program).

Both of these jackasses, Bush and FDR, along with whoever takes over when Bush is gone have only ensured that the market never corrects itself and the trouble and misery get prolonged and drawn out. If FDR hadnt been such a horrible moron the economy would have balanced itself in half the time. We're still off balance today because of what he did. Now some neo-con/neo-lib partnership has promised to repeat the same mistakes.

But no, FDR was a great president and Bush is the moron.

They're both horrible. Depending on how long this mess goes on for Bush just might dethrone FDR as being the worst economic president in history.

So lets all do what the mighty author of pop-trash suggests and follow the failed tactics of one of Americas worst Presidents.

reply to post by ArMaP

I'm still getting an error on that link also. Thanks for trying though. When I Google it, using the first 4 words, it appears on the results list, and I can get it, but if I copy and paste it in a reply, it doesn't work. I think it has to do with the large size of the URL, and ATS's inability to handle such a large string of characters.
Anyway, I posted the action list that King mentioned.

reply to post by thisguyrighthere

I agree with you. That was my thoughts, when I read the article. Of course, Bush is the village idiot, and not capable of making any decisions on the economy, but his advisors have shown the inability to think originally. I suspect that they actually looked at FDR's actions, and mimicked them.

reply to post by ProfEmeritus


You should use the correct BB code format to link to stories (rather than just copy paste any old link into a post without format) and there will be no problems.

The code is:

[ url= www.addresshere.com ] text to appear here [ /url ]

(do this without any spaces for it to work)
.

Stephen King: Roosevelt's lesson

Thanks. Finally, the link above.


[edit on 11-10-2008 by ProfEmeritus]