What Goes Up
Wednesday, January 23, 20081 Comment
On the other side of the Atlantic, the US is looking to create similar results. However, rather than a transplant the US hopes a bandage will do. The US Federal Reserve Bank cut "federal funds rate — what big banks charge each other for overnight loans — three-quarters of a percentage point to 3.5 per cent." according to the CBC While President Bush and Congress seek to enact legislation to inject $150billion in to the US economy. The US measures have been induced in the hopes that the sub-prime mortgage crisis, higher cost of living, higher unemployment and lower spending are merely an economic hiccup and not indications of worse to come.
According to Robert Kuttner on Democracy Now! radio with Amy Goodman the current recession/pending recession is "a repeat of a lot of things that happened in the 1920s, where there was too much speculation with too much borrowed money and a complete lack of transparency." The tumbling dominoes are falling for the same reasons and in the same ways that they fell to spark the Great Depression. As a result, a bandage is not the answer but regulation. One would think that harsh lessons like those learned in the depression would be taken to heart but after enough time had passed those with something to gain sought to re-create the same conditions. Robert Kuttner explains in greater detail:
...the Great Depression discredited free-market ideology, because it was such a colossal practical failure. Nobody in the 1930s could argue with a straight face that free markets worked... Rob Weissman, I think very eloquently, ticked off all the multiple failures of deregulation. This did not just happen. This was not an accident. This was the agenda of business, particularly Wall Street, going back thirty years.
This week world markets reacted in force to the speculation of a world-wide recession. The Turkish Daily News went so far as to say that European and Asian Markets were "paralyzed" by losses sustained on Monday the 21st. Indices in the UK, France and Germany dropped 3.9, 4.5 and 5.35 per cent respectively. In Asia the results were similar with indices in Hong Kong dropping 5.5 and India 7.4 per cent.