What follows are quotes I’ve extracted from the March 23, 2008 New York Times article Depression, You Say? Check Those Safety Nets, by Charles Duhigg. These I have categorized under “Then”. Quotes concerning the same issues “Now” I have selected from yesterday’s New York Times opinion article This Is Not a Test. This Is Not a Test. by op-ed columnist Thomas L. Friedman.
Then:
Well, the economists are here to say that you can dig up the family silver and stop training the kids how to jump onto a moving train. While many who study the nation’s economic health agree that a recession has probably already begun, and that it may be long and severe, they also say the odds of a full-blown depression are almost nonexistent.
…the distinction between a recession (a significant decline in economic activity that lasts more than a few months) and a depression (a decline that is much longer and deeper)…
Now:
But I am deeply worried that our political system doesn’t grasp how much our financial crisis can still undermine everything we want to be as a country. Friends, this is not a test. Economically, this is the big one. This is August 1914. This is the morning after Pearl Harbor. This is 9/12.
Then:
Even if consumer confidence hit rock bottom, that most likely would not be enough, by itself, to cause a depression. For things to become really dire, the nation’s financial institutions would have to fail at the same time that unemployment began significantly rising. Only if banks suddenly closed, or it became impossible for companies to access short-term lines of credit, would things begin spiraling out of control.
Now:
Our country has congestive heart failure. Our heart, our banking system that pumps blood to our industrial muscles, is clogged and functioning far below capacity. Nothing else remotely compares in importance to the urgent need to heal our banks.
Then:
But in the wake of the Great Depression, American policy makers began actively managing the economy with a handful of tools, including adjusting interest rates and using massive government spending to spur growth.
Now:
This crisis is uniquely difficult in four respects:
First, to get out of a crisis like this you need to let markets clear. You need to let failed companies, or homeowners, go bankrupt, unlock their dead capital and reapply it to thriving entities. …The problem with this crisis is that A.I.G., Citigroup and General Motors — and your neighbor’s subprime mortgage — are not [Dogfood-dot-com]. You let the market clear them away, and we could all be wiped out with them.
Second, we need to get a market going that would bring fair value and clarity to the “toxic mortgages” crippling the balance sheets of our major banks. This will likely require some degree of government subsidy to private equity groups and hedge funds…
Unfortunately, the president may have to look the American people in the eye and explain that “fairness is not on the menu anymore.” All that’s on the menu now is whether or not we avoid a system meltdown — and this will require rewarding some new investors.
Third, the president may have to make some trillion-dollar decisions — like nationalizing major banks or doubling the economic stimulus — with no real precedent and without knowing all the long-term ramifications.
Finally, to do all this, the president has to make us realize how dangerous a moment we’re in, without creating a panic that will prompt Americans to put every dime in their mattresses and undermine the economy even more.
I wish earned my pay and prestige wrongly predicting outcomes of a complicated multi-variate system that nobody fully understands. My windbaggery is on par with these two.
