The sky is falling!

About a year ago, when I was taking the bus down to San Jose every morning for my job, I subscribed to The Economist to have regular reading materials. I let my 6-month subscription lapse after noticing that every issue was filled with doom and gloom. At one point, though, I was going to blog about how little economists actually know and understand about how "the economy" works. I put it in quotes because what is it really? It's like the human body in that it's more complicated than anyone even realizes. We develop drugs to treat disease but because drugs only address symptoms, they have multitudes of side effects, some so severe that it's sometimes advisable not to even take the drug. Very little in medicine is holistic in that it addresses the health of the entire ecosystem (the body). This is how I see the economy being treated right now, like it has cancer and we're just going to give it a massive dose of chemo even though chemo has drastic side effects and, depending on the health of the subject, sometimes only makes things worse.

I had saved an in-depth interview with Ben Bernanke about the levers he was pulling a year ago. There must have been over 20 quotes that basically said that no one really knows how the whole thing works. He just either turns up or turns down the volume on various dials and sees what happens. The problem, he admitted, with that approach is that it takes time to see the results so every adjustment is followed by a period of growth or decline before another adjustment can be made. Even then, it's not reliable to assume that if raising interest rates was bad then lowering them must be good because everything affects something else. In every interview on NPR lately, I keep hearing that the system is far more complex than it used to be and "we're just discovering that now." The truth, I believe, is no one knows how it works. I wish I understood it just a little, because I feel like this whole thing is being grossly mishandled.

It eerily looks like the 9/11 scenario to me. In both instances, there were many warnings that a disaster was coming and nothing was done to prevent it from happening. I've been reading articles for a couple of years now about an impending housing crisis. These people making the loans knew there was a chance that the whole thing would blow up. They knew, but they didn't care. Why should they? There were huge profits to be made and like the Enron fiasco, some people still made out like bandits while the entire company lost their jobs and savings plans. Secondly, after the disaster, instead of investigating how it happened and figuring out how to prevent it from happening again, our leadership asked to have total control without any restrictions. This is no time for asking questions, they said! Instead, they invaded two countries, locked up hundreds of people without rights, restricted our civil liberties, skirted accountability and spent billions of dollars (not on our economy and infrastructure) and seven years later, we're still fighting the "war on terror" with no end in sight. How do we know this "bailout" won't be more of the same? I can't help wonder if this constant comparison to the Great Depression isn't just a way of scaring us into making a bad decision.

I heard the plan described as basically a way for these financial institutions to unload bad debt without any scrutiny and without having to make any promises in return about how they'll conduct business in the future. These are the same companies that have previously been treated with a "hands off" approach because the government shouldn't interfere, right? This is what we always hear about how the "free market" works and how it rights itself when unrestricted. Kind of like the explanation that when left to the market, the global warming crisis will just magically right itself without any interference from the government. So why does that approach suddenly get turned on its head when these companies, unfettered, behave badly and put everyone in a bad spot? Now they expect the government to bail them out? Bush says to just fork up the cash and not give any lectures. He threatens congress with being responsible for a total collapse of the economy if they don't ask fast enough, if they stop to ask questions or make demands, for instance. And yet no one's asking the question that should be asked which is why it's so difficult to afford a house in the first place.

There has been some speculation that Wall Street should just take the hit. People say that this could go on for much longer than we think. Bailout after bailout after bailout. Has anyone actually done an analysis on the long-term effects of this approach? Certainly, a parent could tell you that bad behavior that goes unpunished, and in fact rewarded, only encourages more bad behavior. Wasn't this the argument when last year, the government made it more difficult for individuals to file for bankruptcy? Why should it be easier for financial institutions to be bailed out while the executives make out with salaries of $10 million and more? Oh no, though, they say this is all for the taxpayer. It's to protect us from total disaster. But don't ask how it works.

Who would do that?

On the way home from work tonight, I cracked open my brand new The Economist. I had no idea when I ordered it that it was a weekly magazine. It really is a depressing publication. Nearly every cover has some kind of war imagery. Whoever said that war is not about money, obviously doesn't know The Economist.

Only a few moments later, for I was still on the first page in "The world this week," I gasped. I had my headphones on so I'm not sure how loud it was but the man I was sitting next to turned to find out what had happened. I took off my headphones and read him this short paragraph:

Ecuadorian officials investigated the slaughter of 53 seal lions in the Galapagos Islands nature reserve. All had their heads bashed in. The motive is unknown.

"That IS worth a gasp," he said. Who would do that? And why? He remarked that sea lions are quite large and it couldn't have been easy, and that the Galapagos is far away from any mainland. I did a report on the Galapagos Giant Tortoise in Junior High. I've always wanted to go there, to Darwin's islands to see the magical animals that don't live anywhere else. I guess I should get going before they're gone!