Alibris Secondhand Books Standard

Wednesday, May 20, 2009

just how bad is it?

We've been told we are currently in the worst economic downturn since the Great Depression. Just how bad is it? CNN has the scoop.

Sample comparisons:

Bank failures: 9,096 between January 1930 and March 1933
57 between December 2007 and May 2009

Unemployment rate: 25% during the Great Depression
8.5% during the "Great Recession"

Times may be tough, but they could be a lot worse.

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Tuesday, February 10, 2009

a different kind of recovery

At the God's Politics blog, Brian McLaren offers a different vision for economic recovery:

I’d like to suggest another kind of recovery … drawing from the world of addiction. When an addict gets into recovery, he doesn’t want to go back and recover the “high” he had before, or even to recover the conditions he had before he began using drugs and alcohol. Instead, he wants to move forward to a new way of life — a wiser way of life that takes into account his experience of addiction.

Perhaps that's what the Western world needs right now: To move beyond our addiction to consumerism, into a new way of life. You can read McLaren's entire article here.

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Thursday, October 23, 2008

too big to fail

Former Secretary of Labor Robert Reich argues that if a company is "too big to fail," it's just too big:

We seem to have forgotten that the original purpose of antitrust law was also to prevent companies from becoming too powerful. Too powerful in that so many other companies depended on them, so many jobs turned on them, and so many consumers or investors or depositors needed them – that the economy as a whole would be endangered if they failed. Too powerful in that they could wield inordinate political influence – of a sort that might gain them extra favors from Washington.

Favors like, maybe, a $700 billion bailout package?

The whole article can be found here.

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Friday, October 10, 2008

solution for the financial crisis?

Sam Norton of the Elizaphanian blog offers a solution to the American financial crisis.

Take the $700bn and use it to pay off the mortgages of the poorest. Instant solvency and liquidity flowing through the system, a Jubilee for social justice, and the bankers aren't favoured over the people they misled.

(hat tip: Steve Hayes)

At first glance, it looks like a simple and just solution. But is it? While the philosophy sounds nice, I have doubts about the implementation.

First, who are "the poorest"? While many Americans own houses, many others don't. This solution wouldn't benefit the poorest of the poor, who couldn't afford to buy a home even under the relaxed standards that got the banking industry into this crisis.

So we're talking about just the poorest homeowners, then. But how do you measure "poorest"? Do you look at tax returns? If so, do you look just at last year's? Consider the case of someone who was making good money, got laid off for six months, but has now found another well-paying job. This person is not poor, and can probably make the mortgage payments without aid, but the one-year dip in salary could qualify them for the government payoff.

So do you look at several years of past returns, and average them? Again, there's a similar problem. Someone who had a low income but got a big promotion is in better shape than the average of the past seven tax returns would suggest. Past performance, as they say in the investment business, is not a guarantee of future results.

So let's forget tax returns. Maybe we should look at net worth. But that would benefit people who have maxed out their credit cards and are making only minimum payments, as well as those who have acquired large debts getting postgraduate education. Members of the latter group have intellectual capital that should reward them financially in the long run; they can probably make their own mortgage payments. Meanwhile, those in the former group need help understanding responsible money management, or a mortgage bailout will do them no good.

It's a nice sentiment, this idea of paying off the mortgages of "the poorest", but I don't see a way to put it into practice.

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