Economist On US Financial Crisis: (Much) More To Come

CARMEN REINHART and Kenneth Rogoff have assembled an impressive collection of data and analyses of financial crises through the ages. Their work has shown that the path of America's subprime crisis has been eerily similar to that of other crises. Looking forward, they have some sobering details for what to expect next.

Read the whole story here.

Comments

[Sundialsvc4]

"Ike" Eisenhower saw it coming. Tried to warn us.

He correctly saw that a "military industrial complex" (his term...), fueled by public debt, would quickly grow to eclipse all other legitimate priorities of government. Its spending would be so enormously huge that it would be stuffed into every hidden corner of the budget ... or simply not included in the budget at all ... and yet, like a cancer, it would continue to grow.

This, more or less, is what has happened to us now. It didn't really matter if you ran a steel mill or made shoes... why not make "brain wave binoculars" (no joke) instead? Why worry about building anything, if "Uncle Sugar" would pay any price that you named for anything that you could dream-up to construct?

This same line of reasoning gradually extended to "ordinary" finance over the course of the next 47 years. Bubble replaced bubble. Factories were closed, and the factories that supplied them, until today it is not possible(!) ... we tried ... for America to manufacture shoes.

There just aren't enough jobs at Wal-Mart, and if everyone works at Wal-Mart there are no jobs at all for Wal-Mart to provide. A resilient national economy is highly "redundant," with money not only changing hands many times (both as invoices and as wages), but doing so within the boundaries of one's own country. Any other business model ... such as the one we now have ... is exploitative, and for that very reason, fails.

[outnow]

Buckminster Fuller and Albert Einstein predicted that the Ponzi economy would crash and burn. Military spending bankrupted the Soviet Union and will bankrupt the US. The combination of a fiat currency and a stock market causes the gamboler mentality to take control.

We are witnessing "financial collapse" where faith in "business as usual" is gone. Financial institutions are being wiped out in the derivatives casino. Savings and retirement plans are wiped out. Risk cannot be assessed.

The next stage is "commercial collapse" where faith in the market breaks down. Faith that "the market shall provide" is gone. Money is devalued or scarce, commodities are hoarded, import and retain chains break down, and widespread shortages of survival necessities become the norm.

[Davwbaird]

It s because of the flute bands.

[KillTheMessenger]

Big deal. If you haven't seen a recession, yet, you simply haven't lived, yet.

[senorlou]

Much more to come is right. Let's face it, our economy, especially the past 8 years, has been a joke. We need to total revamping of our economy from head to toe.

[Davwbaird]

things are not fun anymore?

[curiousasheck]

Monsanto, of Agent Orange and GM Seed fame posted double profits and raised expectations today.

[Enid]

INSOLVENCE
All this wealth and dollars are just numbers on a Ledger.

Now it "SHOW ME THE MONEY" time.

[ObjectiveRealist]

Phil Gramm's legislation in 1999 and 2000 paved the way for credit default swaps and irresponsible lending that directly caused the hyperinflation of the real estate market. The perpetrators in government and industry need to be prosecuted for conspiracy, anti-trust violations and racketeering. Freezing their bank accounts and returning the money to the taxpayers, who earned it legitimately, will return the economy to its 1999 state, minus a couple frivolous Internet startups.

[biwee]

All of this disaster, from the unnecessary war in Iraq to the financial nightmare on Wall St to
collapse of the economy, is from REPUBLICAN IDEOLOGY! Bush will LONG be acknowledged as the WORST President in the history of the USA.

[senorlou]

Agreed.

[Davwbaird]

in the history of the world.

[Peter007]

The recession will be over by July or September of 2009. Unemployment will remain high but slowly dropping during 2010. The government spend spree won't start until April of 2009 when the 1st checks go out. Its always darkest before the storm. Buy a foreclosed house now.

[KillTheMessenger]

Wrong, wrong and wrong.

[instagladiator]

You sharking home sales?

[MajorKong]

Great, so we've got that to look forward to.

[outnow]

More doom ahead in the economy. The crisis is global and based in the credit system. It encompasses auto loans, student loans, commercial real estate loans and securitized products (toxic "bad" paper) based on these careless and excessive extensions of credit. We are at the end of the "biggest asset and credit bubble in world history.... 60 trillion of nominal protection was sold against stock of corporate bonds of just 6 trillion," according to latest article by Nouriel Roubini ( a PhD who teachs at Stern Business College in NY) in Foreign Policy Magazine. "Dr. Doom," as he is called because he predicted the crash, suggests that we have to re-capitalize the banks and financial institutions or things will get even worse.

Dr. Doom does not suggest getting rid of the Fed. But he does say that aggressive, coordinated, and effective action by policymakers will ensure that 2010 will not be even worse than 2009. The recession is not "V" shaped but "U" shaped - a long down time until "economic recovery."

[swiss-ski]

When BHO takes the oath on the 20th, the recession is officially over BUT then the DEPRESSION
officially begins.

[Igetitnow]

Your depression maybe. Not mine. I'm thrilled that Obama will be taking the oath!

[texastrixie]

I'm also thrilled, but it is about 50/50 if Obama finds himself trying to get us out of a recession or a depression.

[SENATORCALLENBOWE]

WE TOLD YOU WHEN WE SENT YOU OUR FEDERAL INVESTIGATION :)

[rich misty]

Bush is not yet out of office and Republicans are already blaming Obama.

[swiss-ski]

You have vivid dreams.

[EinChicago]

Rogoff also predicted in April of last year that the Euro would zoom to more than $2 by last summer.


Ahem.