The economy explained...in an unnaturally huge nutshell

This blog is about a great article I read regarding the economy. Check it out. It gets deep, but there's knowledge in them there words!

Probably my favorite publication ever is The New Yorker. The cartoons are witty and wild sometimes. The poetry is great. The features are marvelous. One of my personal favorites was A Better Brew, but The New Yorker is filled with so many stories about a vibrant, diverse world. The writing is tremendous. These people have the craft down. I mean, seriously, I was engrossed in an article about Alec Baldwin, for crying out loud. It was that good.

I digress. I found another favorite article, one that has helped me better understand this financial poo storm. It's the grandest poo storm in my adult life. The article is Anatomy of a Meltdown: Ben Bernanke and the financial crisis and it's written by John Cassidy. Like many of the New Yorker's material, it's comprehensive (read: long). I actually started writing this blog halfway through the article. I wanted to get my thoughts out while they were still around for the harvest.

The article pulled me two emotional directions. On the one hand, I felt bad for Bernanke, the Fed chairman. He really is a brilliant dude, one that can think on levels that few can even fathom. The worldwide recession was an avalanche. Once a little turned into a lot, no one man was going to stop it.

Bernanke thought that the Fed should stick to a traditional role and if a bubble (.com bubble, housing bubble, etc.) burst, then the Fed could bring down rates to ease the blow to the overall economy and the system would self-regulate. The article mentions an M.I.T. professor who said this model didn't take into account the possibility of credit running dry. Credit running dry. Hmmm.

The economic avalanche is bigger than any one person, but Bernanke's decision to not rescue Lehman Brothers is being dubbed the breaking point for the downturn. Here's a taste from the article:
"Between October 6th and October 10th, the Dow suffered its worst week in a hundred years, falling eighteen per cent. As the selling spread to overseas markets, the Fed’s failure to save Lehman Brothers was roundly condemned. Christine Lagarde, the French finance minister, described it as a 'horrendous' error that threatened the global financial system. Richard Portes, an economist at the London Business School, wrote in the Financial Times, 'The U.S. authorities’ decision to let Lehman Brothers fail will be severely criticised by financial historians—the next generation of Bernankes.'"

A little later Cassidy wrote that in 2005 Bernanke denied that the global troubles were from excess spending in the U.S., but instead were caused "excess saving in China and other developing countries, where consumption was artificially low."

Excessive saving was the problem, eh? Really, Mr. Bernanke et al., you're going with that? I'm just saying that "excessive saving" sounds like a pretty sweet problem. Sign me up for that one.

Sometimes I think this article depicts Mr. Bernanke as one step behind everything - the warning signs, the trends and he was behind on admitting that there were problems festering. The way I interpret the article is that Mr. Bernanke is dealing with some denial. Great big eff ups on his part. He's not alone, but he's a player.

Bernanke is exhausted. The article hints at that subtly, but enough for me to notice. He's got quite the job ahead of him. This is where, for all his faults, I really do start feeling bad for the man (again). And even though there's a major transition going on in the country, he's not home free. He's been appointed to serve until January 2010.

If you want to curl up by the fire and understand this big ol' financial fecal-fest, I'd once again recommend John Cassidy's article Anatomy of a Meltdown Ben Bernanke and the financial crisis. Yes, it is kind of a Ben Bernanke beat-down, but it's not completely undeserved. It's very informative. You just have to be ready for a bunch of information. This article, much like this financial crisis, is going to be long.


And for some reason, this still feels like the first act in a tragic play.

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