[OPE] Old men and new things... the poetry of the financial crisis

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Tue Mar 18 2008 - 17:38:18 EDT

Bank of Israel Governor Mr Stanley Fischer says that crises have a "rhythm":

"While Fischer [who advised the Bernanke on his doctoral thesis at the Massachusetts Institute of Technology in the 1970s] acknowledged the "Fed is clearly more concerned about growth than inflation,'' he ruled out a repeat of the early 1980s when the U.S. central bank confronted double-digit inflation and unemployment. That is unlikely to happen because Bernanke's Fed would raise interest rates ``long before'' inflation got out of hand, he said. "The world is full of surprises, but I don't think that is a likely scenario,'' he said. "Ben Bernanke is an outstanding economist.'' (...) He declined to forecast when the credit squeeze will pass, only that it would. ``I've lived through crises, they have a rhythm,'' he said. The U.S. economy is ``not going to collapse, it will come back.'' http://www.bloomberg.com/apps/news?pid=20601109&sid=aIOsecvhsDZ4&refer=home
To be fair, Fischer puts his money where his mouth is: "We will continue to take measures to support growth, while this does not oppose the safeguarding of stable prices," Fischer said at a press conference following Israel's central bank's buying up some $600 million recent days in a bid to check the greenback's rapid descent. http://www.haaretz.com/hasen/spages/964754.html

John Lipsky, First Deputy Managing Director of International Monetary Fund meanwhile also has a useful comment: he stated that "in the current environment, monetary policy may be less effective than in past episodes." http://www.imf.org/external/pubs/ft/survey/so/2008/NEW031208A.htm

Yep. But my favourite is from President Bush: "In the long run, our economy is going to be fine," Bush said. "Right now we're dealing with a difficult situation." http://www.chinadaily.com.cn/world/2008-03/17/content_6543532.htm

Martin Hutchinson hits the nail on the head: "The depth of house price declines has a near-exponential effect on mortgage defaults, since a borrower can walk away from a home mortgage without declaring bankruptcy - the transactions are generally non-recourse." http://www.atimes.com/atimes/Global_Economy/JC19Dj01.html

The New Seekers sang once:

I'd like to build the world a home 
And furnish it with love
Grow apple trees and honey bees
And snow-white turtle doves...

Now watch it all being stuffed up again. All that is solid melt into air. Actually, Hutchinson is a something of a Roubini fan, he believes in a really big crisis. 

Where did the contemporary nightmare all begin? According to Robert Kuttner, with the repeal of the Glass-Steagall Act, by means of the Gramm-Leach-Bliley Financial Services Modernization Act signed into law by Bill Clinton in 1999. A Marxist (if there still are any) would argue this is not really true. After all, that is just a legal superstructure, which came about to rationalise changes in the economic base. But there's no doubt that, although it strongly denies any exploitation of unpaid surplus labour and tried to provide the proletariat with their own home, the financial crisis is going to tie bourgeois society in great legal knots about its ill-gotten gains. It will be sort of like, "all power to the lawyers". Obama and the Clintons are all lawyers. Bush has an MBA, go figure. McCain graduated from the Naval Academy in 1958. Well, if the lawyers fail, there's always the army to fall back on.

I've still got the 'flu so I will leave the feverish remarks there.


In the dock of Tiger Bay
On the road to Mandalay
>From Bombay to Santa Fe
Over hills and far away

- Ian Dury, "Hit me with your rhythm stick"

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