September 29th 2008
Bailing Out, Buying In: It’s Time To Take A Breath
“O
ur time has run out. We’re going make a decision. There are no other choices, no other alternatives,” said Rep. Spencer Bachus, ranking Republican on the House Financial Services Committee.
Then the vote came, and the House of Representatives voted down the rescue plan by a vote of 228-205 … whereupon the Dow recovered 100 points before trailing off again to a daily loss of just below 600 points.
Our time has run out? What does that mean? Certainly the economy’s time has not run out; there is a vested interest on the part of the millions who make up and move the economy to keep it running; they’re not going to quit this afternoon because Congress fell 14 votes short. It’s politicians’ time that may be running out, especially if they want to put this as far behind them as they can before Nov. 3. (It was, after all, the House that voted it down – the House, where Representatives answer to the public every two years.)
Irwin Kellner at MarketWatch wrote this morning of the lack of correlation between what’s going on now and what happened in 1929, throwing a lot of calm reality in the face of the hysterics who fear imminent and total collapse of the economy.
Here are just a few of his examples:
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In the crash of 1929 the Dow Jones industrials plunged 40% in two months; this time around it has taken a year to fall 22%.
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The jobless rate jumped to 25% by 1933; it is little more than 6% today.
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Some 40% of all mortgages were delinquent by 1934 compared with 4% today.
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In the 1930s, more than 9,000 banks failed compared with fewer than 20 over the past couple of years.
On top of that, the policies imposed in 1929 were disastrous, and are not being replicated now. Of course things could get worse, but we’re not going to go from a thick steak at Morton’s to the soup kitchen over night if Congress spends another day or two to improve the legislation a tad more. A month or two could be a problem, but a day or two … c’mon.
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