Friday, May 24, 2013

"What this country needs is another financial crisis"

That is just the headline in today's Washington Post for a column by semi-retired Allan Sloan, who says in the text, "What this country needs to get its act together is a good five-alarm financial crisis."  Really.  He does not mean it, as he gets worked up about Republicans possibly damaging US credit with another debt ceiling crisis later this year, but he certainly said it, and this is clearly a very strongly felt sentiment among Washington VSPs, even though we have still not come out of the high unemployment from the last financial crisis.  This is not what bothers him.  He seems upset that the stock market is doing well, housing prices are up, as are corporate profits, although he fails to mention that these have happened with inflation still below the Fed's target rate.  So what does he want out of this supposedly needed new financial crisis?

One is that we should have done something about banks being too big to fail.  I actually agree with him on this one.  However, he fails to note that part of how we got out of the last financial crisis without more bank failures than we had was by letting our very biggest banks buy up several of the smaller ones that were on the verge of failing.  What was his alternative?  I do not remember what he recommended at the time, but the main alternatives were either letting those banks go bust and paying off the depositers (which quite likely would have bankrupted the FDIC and thrown the expense on the taxpayers) or some sort of temporary nationalization such as the Swedes did in the 1990s.  Maybe one of those would have been better, and maybe we should have put in place some mechanism to break up the biggest banks so that some of their gobbled up subsidiaries can go back to failing, but it is not at all obvious to me that having another financial crisis is worth achieving any of these.

Oh, and he is all upset that the budget deficit is going down and so fast! He warns that some of the revenue boosts are temporary, and of course down the road we shall face those inevitably higher interest rates on the national debt, the usual boogey-man.  But then, of course, he gets to the standard whine of the VSPs, we did not cut Social Security, Medicare, or Medicaid!  What a waste of a financial crisis!  Tank the markets and send the unemployment rate back above 10% so that we learn the error of our ways and definitely cut those future benefits now so that we won't have to worry in the future about how they might be cut in the future!  Ultra gag.

OK, OK.  I must admit that in the end he really does not mean it.  In his final paragraph he tells us, "I don't want to see a crisis, and I hope our alleged leaders, who aren't stupid, bestir themselves before one strikes.  But I sure wouldn't count on it. Too bad for them.  Too bad for us."  However, if what he thinks they need to do is to cut the social safety net to shreds, then let us just sit quivering in fear of the crisis that he forecasts we face if we fail to follow his humble advice.

Barkley Rosser


Anonymous said...

One silver lining to a new financial crisis might be a Warren Commission -- Elizabeth Warren, that is. :)

Myrtle Blackwood said...

Re: "What this country needs to get its act together is a good five-alarm financial crisis."

It's not a very clarifying statement from Mr Sloan, Barkley.

Is Allan Sloan craving danger, or opportunity? Does he want to embrace chaos because his life is pretty boring? Maybe he thinks that the American population haven't reached their potential and need an adrenaline rush of some kind to get their act together?

Is Mr Sloan endangering the world by his lack of good ideas? Or is he panicking because he doesn't know what's going on?

If we have too much of a crisis, I fear it will make messes of almost everyone.

Myrtle Blackwood said...

"...“…The international monetary system also now faces a clear and present danger: currency wars. Virtually every major country is seeking depreciation, or at least non-appreciation, of its currency to strengthen its economy and create jobs....The “target list” of manipulators for priority policy response identified... includes China, Denmark, Hong Kong, Korea, Malaysia, Singapore, Switzerland and Taiwan, which accounted for half the estimated amount of unjustified intervention in 2011 ....Japan should be put on a “watch list,” ... Most of the remaining intervention is by major oil exporters, both members of OPEC led by Saudi Arabia and non-members such as Norway and Russia. ...

John Connally [four days after the Nixon shocks of August 1971]: “I appre­ciate the advice from you gen­tlemen and want to share my own phi­los­ophy with you before we break up: the for­eigners are out to screw us and our job is to screw them first. Thank you and goodbye.”

Stavros Niarchos Foundation Lecture
May 16, 2013
C. Fred Bergsten Senior Fellow and Director Emeritus
Peterson Institute for International Economics

Anonymous said...

Oh no, another financial crisis will definitely destroy the country. Same goes with the affected countries in other parts of the world.

We, at Branded Products would not want our business to suffer as well as the rest of the world.