Tuesday, September 30, 2008

Prove to Me the Sky is Falling

Adam Davidson and Melissa Block discussed fears about the financial crisis in a segment on All Things Considered yesterday. Davidson described the fears, but then dropped an interesting little tidbit:

Adam Davidson: That is the real fear. That is when this goes from being a typical cyclical downturn to a true crisis.

Melissa Block: The warnings about that have been so emphatic. There have been predictions of a crisis that would rival the Great Depression. Millions of jobs lost. Is that credible do you think?

Davidson: I will say that I am finding it hard to find economists who echo that from the left, right, or center. I think everyone agrees this is a really serious crisis. That it would be good for something to happen to lessen it. I am finding a lot of people who say this will right itself, that is what markets do. It might take awhile. It might take a year or two. But it will right itself. . . .
If a business journalist cannot find ANY economist to support the position that there is the potential for the current financial crisis to rival the Great Depression and/or to lead to millions of jobs lost, shouldn't that business journalist call such assertions what they are: fear mongering?

This example illustrates the point former New York Times reporter David Cay Johnston made in an excellent segment of On the Media.
Brokaw and many other journalists on TV, and some in print and on the radio, assume because we were told there’s a crisis, there's a crisis. Now, the fact that we've had a couple of big firms on Wall Street fail, that’s capitalism.

If you look around, you'll notice that banks are still making ordinary loans to ordinary businesses. Your mailbox is still full of proposals to sell you credit cards and extend you debt. The Internet still has ads for these very toxic mortgages that are at the heart of this. They're being advertised all over the Internet.

You know, I don't have any doubt that whatever people in the market have said to Secretary Paulson has scared him. But remember that Secretary Paulson used to be the head of Goldman Sachs, the biggest investment bank in the country, and Goldman Sachs has announced that it’s converting itself into an investment bank, which will allow it, by the way, to get in on this 700 billion dollars.

That alone ought to have people asking questions. Well, wait a minute, what’s the pricing of this deal and who’s going to make money off it?
Rep. Dennis Kucinich similarly questioned the premise behind the bailout bill on Democracy Now. Does something this transparent even warrant being called a conspiracy?

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