Ain't that America?

Home of the free, baby.

This is a nation 14-months removed from the demise of our investment banking sector. They all disappeared last year: first Bear Stearns crumbled under the weight of debt contracts - those toxic assets linked to CDO and CDS contracts that the finance boys talked them into writing; that was just an appetizer. Then, Lehman Brothers went belly up, after a desperate search for an acqusitiin partner. When Bear had gone under, folks thought it was just a temporary problem. But when Lehman fell, the remaining players scrambled for the warm embrace of the Federal Reserve. Those that survive - Goldman Sachs, Morgan Stanley - do so as bank holding companies, supposedly locked into golden handcuffs which prevents them from making the same, wild bets that felled their former compatriots.

The President then - George Bush - thought he was presiding over the end of the American republic. The Treasury Secretary scribbled some hasty notes on the back of a napkin and asked the Congress for hundreds of billions of dollars, which he could use to save the world - or at least the banks.

Well, that plan didn't really work and the backup plan didn't really work and the fall back plan has only been able to keep banks alive, not so much on economic activity.

But one thing has happened: the immediate threat to our economy - the worlds economy -is over. But the crazy thing is - instead of celebrating with a modicum of joy, people are out in the streets whining about debts that won't come due until decades after their death.

Bruce Bartlett has put more economic rigor into this conundrum:

http://www.capitalgainsandgames.com/blog/bruce-bartlett/1200/why-economy-needs-spending-not-tax-cuts

Take a quick review and let me know if you can figure out why people - still mired in the effects of the worst economic slowdown since the Great Depression are so eager to stop spending. It looks to me like we need to increase spending.



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