Isn't the real problem a massive lack of accountabilitty. Consumers spending money they don't have for products and services they want and don't need. Business grew to meed this demand; banks lent money they should not have to fuel their growth. All of this in turn led to corporate greed and escalating compensation with no accountability. This in turn stifled creativity and problem solving and led to further waste of just hiring additional people rather than training existing employees and holding them accountable. The end result - we have businesses filled with employees and management that aren't capable of doing their jobs and consumers aren"t able to pay their debts.
This isn't a crisis that was made on Wall Street. Yes, Wall Street enabled it and made it worse; in addition, there is no place where the greed is more apparent than on Wall Street. I agree with the remedie's suggested in the article, with the exception that consumer habits wasn't really addressed. Yes there needs to be massive job training and not just for people who have lost their jobs so they can get other jobs, but also for individuals who have managed to hold onto their jobs. In addition, there should be a massive education program regarding consumer finances so individuals will realize they can not continue spending more than they make indefinitely. This is a crisis that was fed from all areas of the economy and not just Wall Street.
The Big Bang of Bailouts
World leaders have spent trillions on confused, inadequate rescue plans. They need to spend more.
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The Bailout Felt 'Round the World
A look at how an American made crisis has shaken economies the world over.
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It is now frighteningly clear that the world's dramatic financial rescue efforts are both unprecedented in scope and creativity, and wholly inadequate. Despite the round-the-clock labor by exhausted officials on a number of continents, the medicine is not taking. We stand on the threshold of a calamity that goes well beyond the rupture of the banking system and the deepening of a global recession and that leads to major political instability and conflict. The needed response is a big-bang global bailout that is even bigger than what we have seen so far, one that puts governments in front of the contagion rather than always one step behind, and that is large and sweeping enough to restore confidence.
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To be sure, no one can accuse governments of dithering. In the United States, Ben Bernanke and Hank Paulson have orchestrated a series of rescue measures that now number more than a dozen so far this year, from the $200 billion bailout of Fannie Mae and Freddie Mac to the $1.4 trillion guarantee for bank-to-bank loans. But that's the problem. Depending on how you add up these measures, the total reaches as high as $8 trillion, a figure that represents more than half of U.S. GDP and is, according to Barry Ritholtz, author of the forthcoming "Bailout Nation," more than the sum of every major U.S. federal project in the past century, including the invasion of Iraq, the New Deal and the Marshall Plan to save Europe after the war. Indeed, it is more than the total the United States spent on World War II—$3.6 trillion in today's dollars.
Europe's combined effort has been just as aggressive. A new study by Independent Strategy of London puts the total spent by the nine leading European economies on various moves just to shore up wobbling banks at $3.36 trillion, versus $3.35 trillion by the United States. While the Bush administration's March stimulus package came to 1 percent of U.S. GDP, France, Germany, Italy and many other European nations have already produced packages that are relatively larger. And nearly every central bank on the planet has dropped interest rates so fast and so far that the banks can no longer use this basic weapon to get their economies moving.
It's very clear what happens next. More piecemeal, inadequate rescue attempts are the order of the day. The U.S. and European authorities are preparing 11-figure bailouts for their automobile industries, when experts already say that Detroit, in particular, will need at least 12 figures. Asian nations including China and India are joining the list of those trying to inspire consumer and company spending with tax cuts, or vast outlays of taxpayer cash on new building projects. The incoming Obama administration plans to spend $500 billion more on similar stimulus measures; Japan is debating a $50 billion plan; and the EU just approved $264 billion.
Yet economic conditions continue to deteriorate. Tight credit is slowing growth, which is raising unemployment and sapping consumer and investor confidence, which is scaring banks into restraining credit further. In such an intertwined downward spiral, all numbers are quickly out of date, but all point down.
The Christmas season now looks set to be the worst period for the U.S. economy since 1991, contracting at an annual rate close to 3 percent. The IMF continues to revise downward its projections for the global economy, and now expects 2.2 percent growth in 2009, down from more than 5 percent in the past four years, with rich nations falling into negative territory, and emerging markets—including China—growing much more slowly than before. For the global economy, most experts consider less than 2 percent growth a worldwide recession, because poor nations need some growth to create jobs for expanding populations. The World Bank just added its voice to those forecasting global recession, projecting barely 1 percent growth in 2009, and the sharpest contraction in developing nations since the Great Depression.
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