Het Neoliberale Geloof 85

'The Great Debt Crisis Begins
By Hale Stewart, Huffington Post
Posted on January 14, 2008,

Printed on January 17, 2008

There is growing talk on Wall Street about the possibility of a
recession. Since the beginning of the year three Wall Street firms
(Merrill Lynch, Morgan Stanley and Goldman Sachs) have all stated
they believe we are either in a recession already or are very close
to a recession. In other words, it's no longer a matter of if a
recession happens but when it will happen and how long it will last.
In response to these developments, various presidential candidates
have proposed various solutions. However, none of these will work,
largely because this is not a typical slowdown caused solely by
slowing consumer spending or business investment. Instead, it is a
slowdown caused by inflated asset prices and a nation gorging on
debt. As a result, it will probably take a lot longer to come out
from under this problem.

A recent Los Angeles Times Article stated the basic problem thusly:

What makes bubbles so dangerous is that their consequences, when they
burst, are wider, often more damaging, and certainly more
unpredictable than those of ordinary downturns.

"We are more prone to bubbles than we used to be," said John H.
Makin, a former senior Treasury official with several Republican
administrations and now a scholar with the conservative American
Enterprise Institute in Washington.

"The old-fashioned recession, where the consumer ran out of gas or
there was an economic policy mistake, doesn't seem to occur much
anymore," said Alice M. Rivlin, a former vice chair of the Federal
Reserve and Clinton administration budget director. "As we've seen
from recent events, bubbles seem to be playing a bigger role."

The basic problem faced by the US economy right now is excessive debt
caused by recklessly low interest rates from the Federal Reserve.
Here is a chart from the St. Louis Federal Reserve of the effective
Federal Funds rate since 2000.'

Lees verder: http://www.alternet.org/story/73633/