Dean Baker: Origins of the Financial Crisis
As a companion piece to the Amy Goodman interview on the imploding U.S. economy, I’d like to post this carefully reasoned analytical piece on the origins of the crisis by Dean Baker, our favorite progressive economist. Dean shows how cowboy financing fed into the housing bubble and allowed it to grow to proportions that would not have been possible with a well-regulated financial system. This ten-page essay tells you everything you always wanted to know about the economy but were afraid to ask (as Freud knew, money = sex). After you read this piece, you won’t wonder WTF is happening anymore, you’ll know–for better or for worse. And you’ll be able to impress your friends with your knowledge of MBS (mortgage backed securities), CDOs (collateralized debt obligations), SIVs (structured investment vehicles), and of course the infamous CDSs (credit default swaps).
I know that it’s tempting to just put your head under the covers and pretend the meltdown isn’t happening, but there are some key principles for reform of the financial system that we can all get behind. To do this effectively, however, we need to know what’s what financially speaking, and there’s no better Virgil to lead us through this inferno than Dean Baker. Dean was gracious enough to send this piece for republication here on the Ruth Group blog, so I hope you’ll take a look. It’s in easy-to-download pdf format.
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September 18th, 2008 @ 11:36 am
The size of the “rescue” is mind blowing, of course, but so is who it’s aimed at — the very highest crust of the upper crust. Nada for all who have been run out of their homes, whose businesses may fail for lack of credit, whose 401Ks are in jeopardy. I’d like to see an analysis of what would happen if the big institutions were left to fail and all this money was directed at the consumers and small businesses upon whom recovery depends. Don’t loan AGI the money; loan it to everyone whose live-in property is in danger. Offer a line of credit equal to a years gross income to every small business. Make-good all losses in pensions and other retirement instruments for those whose networth is under $2 million.
Let the wealth trickle up from there instead of down in the form of fear, losses and prayerful hopes, as usual.
January 13th, 2009 @ 11:29 pm
At the time of financial crises we need to come together united and try to solve the problems which are responsible for such a hazard. We need to overcome it. It is meant to bring calm to the population and markets and display government strength and stability.