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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

where have all the good times gone « Previous | |Next »
March 20, 2008

Does this particular credit crunch financial meltdown, with its centre in New York, signify that the good times are over for the US, as Rupert Cornwell argues? By all accounts the crisis---market turbulence or volality some sharp elbows call the market crashes, mortgage failures and liquidity freezes----still has some way to run and to spread to areas beyond mortgages.

ThompsonM.jpg Mike Thompson

A financial crash means that survival is the priority not bargains in this bear market. Even though the hedge funds may fade away, it looks as if Goldman Sachs and Lehmann Brothers are still okay.

However, as Thomas I Palley notes:

stopping a financial crash does not get the US economy out of the woods. There remains the underlying residential mortgage debt crisis, and many risky mortgages will go bad as will the mortgage backed securities in which they are embedded. There is also the problem of recession, which calls for reviving aggregate demand and getting the economy growing again. Both the mortgage debt crisis and the recession need their own tailored policy responses. However, if the Fed fails to prevent a crash, the mortgage crisis will be deeper and a recession far more severe.

As Cornwell says a backlash against the moguls of Wall Street so greedy in good times, so quick to plead for the state's safety net in bad ones is already starting. The tide of deregulation will be reversed, and government, so often branded the enemy, will again be regarded as a friend.

| Posted by Gary Sauer-Thompson at 5:02 PM |