Financial crises bring out the best in everyone! Here's Philip Bowring, former editor in chief of the Far Eastern Economic Review, frothing in high style in Asia Sentinel:
Sack Henry Paulson. Liquidate Goldman Sachs. Call Alan Greenspan to account. End Moody's rating franchise. Arrest a few dozen salesmen of Collateralized Debt Obligations (CDOs). Those should be the correct responses to the chaos roiling western financial markets and beginning to have a knock-on effect on an otherwise soundly placed East Asia.
The market chaos is not a random event like a tsunami. This is the direct consequence of the Ponzi schemes created by Wall Street to satisfy its own inestimable greed. It is the result of a pyramid of lies which has immeasurably enriched U.S. Treasury Secretary Paulson (whose shares in Goldman were worth almost US $1 billion) and a whole class of similar investment bankers at the expense of millions of U.S. home owners and tens of millions of pension plan investors around the world who were persuaded to buy Wall Street's elegantly packaged deceptions.
The king of Wall Street for the past several years has been Goldman Sachs and the king of Goldman was, until last year, Paulson. He was paid U.S. $29 million and his successor Lloyd Blankfein, who took over in mid-year, was paid $53 million. They should give all that back, not to the shareholders of Goldman but to a fund to help its myriad victims.
And there's a lot more where that came from.
Brad DeLong is singing a different tune: "Today is a great day for finance," he declares delightedly, because at long last economists who have been waiting to see what happens when business-as-usual on Wall Street is finally disrupted get to test the validity of some of their most-cherished theories. And we are not to worry about "macroeconomic implications," by which I think DeLong means the chance that the current credit crunch will drive the U.S. into a recession and cripple the thriving global economy.
...the nightmare scenarios always involved a simultaneous collapse in the dollar and in consumer demand, and a Fed that couldn't decide whether to fight the inflation coming from rising import prices or the unemployment coming from collapsing consumer spending. Neither of those show any signs of happening.
Regular readers of How the World Works know that lately I've been hard put to focus on anything besides the current market turmoil. But I was distracted by a Reuters article that hit the wires this morning reporting the conclusions of a report commissioned by the Indian government: "Conditions of Work and Promotion of Livelihoods in the Unorganized Sector."
According to the report 836 million Indians live on less than 20 rupees a day, or about 50 cents in U.S. dollars. That's 77 percent of the entire population of India! It's an extraordinary number, especially given World Bank estimates in 2001 that the total number of people in the world living in "extreme poverty" (defined as under a dollar a day) was 1.1 billion. (India's own poverty threshold is calculated to be 12 rupees a day.)
So let's put things in perspective. A strong global economy offers the best chance for India to sustain the high growth rates necessary for hundreds of millions of Indians to escape back-breaking poverty. If the credit crunch hammering the world's financial markets does spill over into the "real economy," then the cheerleaders who told us so confidently that the financial innovations at the heart of the current crisis would decrease the chances of an economic meltdown will have much to answer for.