Video: Krugman's Friday address to Nat'l Press Club

December 21, 2008 6:15 PM

The president of a Savings & Loan sent the following email to his family: If you have one hour of your time to invest in learning more about the current economic crisis, I highly recommend you click on one of the two below links and view [Paul Krugman's Friday address to the National Press Club]. His remarks take about 1/2 hour followed by 25 minutes of Q&As. I believe you will find watching it worth your time. P.S. If you decide to view Krugman's speech, I recommend you view it "full screen" for the best effect of viewing his body language. Link 1, Link 2

I pass it along to you with the same recommendations.

posted by spock (63 comments total)

Wow. The text of the e-mail makes it sound like he's treating his family as customers. Bet that's a happy home he's got there.
posted by Effigy2000 at 6:22 PM on December 21, 2008

Video doesn't work for me.

^ does a "happy home" require every interaction to be sickly sweet? Nothing wrong with that tone at all when the message is about an economic crisis. Nevermind that the salutation and farewell are not quoted.
posted by autodidact at 6:38 PM on December 21, 2008

yeah, me neither... here's an audio stream:

http://minnesota.publicradio.org/display/web/2008/12/19/midday2/?refid=0
posted by geos at 6:41 PM on December 21, 2008

here's an audio stream

Sweet, all I need is a Descriptive Video For the Visually Impaired track to cover the body language, and I am good to go. Or somebody could just bloody well tell me.
posted by Alvy Ampersand at 6:48 PM on December 21, 2008

SPOILER: He's making a wanking motion all the way through the video.
posted by An Infinity Of Monkeys at 6:49 PM on December 21, 2008 [24 favorites has favorites]

Thank you!
posted by Alvy Ampersand at 6:50 PM on December 21, 2008

Great video. If we can find a transcript somewhere, that would be great for pulling quotes out.
posted by gen at 6:53 PM on December 21, 2008

Link works fine for me -- try using (cue sounds of violins being punched) internet explorer. It's an embedded WMV, and I've noticed that Firefox doesn't always like to play with embedded Windows Media files.
posted by chakalakasp at 6:57 PM on December 21, 2008 [1 favorite has favorites]

Great video. If we can find a transcript somewhere, that would be great for pulling quotes out.

Not the whole speech, but a very lengthy excerpt.
posted by chakalakasp at 7:00 PM on December 21, 2008 [1 favorite has favorites]

Well, if anyone has a Federal News Service username/password ...
posted by WCityMike at 7:34 PM on December 21, 2008

Krugman is great and all, but why excerpt an anonymous S&L president?
posted by delmoi at 7:35 PM on December 21, 2008

Video 1:
mms://a551.m.akastream.net/7/551/1459/1228487676/video.vdat.com/EncodedMedia/videonewswire/video/windows/97883_99257.asf

That URL works fine for me when passed to mplayer. It would undoubtedly work if dumped into Windows Media Player.

I can't get the second video (hosted by CSPAN) to play in Linux. Has someone with a Windows machine and Firefox 3 had success with it?
posted by simoncion at 7:50 PM on December 21, 2008 [1 favorite has favorites]

Delmoi -- I think it is supposed to make it "viral," instead of simply a link to some NYT columnist.
posted by Slap Factory at 7:50 PM on December 21, 2008

SYNOPSIS

Prelude

Q: Why didn't the Great Depression start up again after WWII?
A: Dunno.


Introduction

What made the Great Depression great was the failure of the banking system. Guess what: the alphabet soup of financial instruments that just all turned to shit was bigger than the regular banking system.

Thesis A:

There is no policy that the federal reserve can enact that will change anything right now i.e. the end of monetary policy. Guess we didn't figure out the instabilities in the business cycle after all...

Thesis B:

Keynes had something to say about all of this, let's hope it's still relevant.


Point of Fact A: it takes 200 billion dollars of government stimulus in a year to lower the unemployment rate 1%

Point of Fact B: I (krugman) predict unemployment will soon be 9-10%


Conclusion: $850 billion over two years is chump change. Prime the presses it's Depression Era Economics all over again.
posted by geos at 7:53 PM on December 21, 2008 [4 favorites has favorites]

Speaking as someone without a job right now, that was very depressing.
posted by sevenyearlurk at 7:57 PM on December 21, 2008 [1 favorite has favorites]

I read the transcript, but couldn't get the video to play on my mac. I honestly don't care enough to try to either. I figure if they wanted people on macs to be able to see their stuff they would have followed standards. Oh well.

And it was nice reading an economist telling me that we're all fucked. Felt that way for a while now. Nice to have someone say there's a reason for it, that it won;t get better any time soon, and chances are we won't do anything about it until it's too late.

Never felt like stocking up on ammo and fuel oil before. Also never felt as screwed before. Bailouts for everyone! Airlines are suffering, the economy sucks, but British bankers are happy.
posted by cjorgensen at 8:03 PM on December 21, 2008

An enormous number of people have been predicting this kind of shitstorm for literally years, myself included (and I don't know nothin'), and it takes until now, when the writing is so clear on the wall that you'd have to be George goddamn Bush not to divine what's happening, for the president of a fucking bank to send a couple of useful video links to his family?

Either that's fabrication, or 'the president of a Savings & Loan' is like so many of his colleagues in the industry, apparently: an idiot. Signs point to both.
posted by stavrosthewonderchicken at 8:05 PM on December 21, 2008 [4 favorites has favorites]

SPOILER: He's making a wanking motion all the way through the video.

Are you sure it's not just him charging up his Renault eco calculator?
posted by gyc at 8:23 PM on December 21, 2008 [1 favorite has favorites]

Great, I read the comments first. Now there's no way I'm watching that thing. What happened to spoiler alert? I'm going to go stick my head in the snowblower now.
posted by Camofrog at 8:28 PM on December 21, 2008 [1 favorite has favorites]

Speaking as someone with a job right now, that was also very depressing.
posted by Devils Rancher at 8:29 PM on December 21, 2008

I'm so depressed I've already offed myself, and am writting from the afterlife. It's nice, there are plenty of chairs here.
posted by nola at 8:51 PM on December 21, 2008 [2 favorites has favorites]

I'm going to go stick my head in the snowblower now.

Oddly enough, that's one of the proposed Federal Stimulus Plans.
posted by chakalakasp at 8:52 PM on December 21, 2008 [9 favorites has favorites]

Spend 900 billion and bail out excess individual credit card debt. Offer an absurdly low interest rate, spread the payments out long-term like a mortgage. Some conditions would need to be set, of course--credit cards have to go, financial tutoring through the community college system, maybe? Payments back into the fund serve to make the service available to others who need it, which brings in an element of responsibility to the community. rather than just to a financial institution. Make the banks that just received bailout money administer it.

Who knows--might stimulate the economy a bit if folks have more money to spend on real goods and services rather than debt service.

Yeah, I know......
posted by halcyon_daze at 9:26 PM on December 21, 2008 [1 favorite has favorites]

Youtube-ized for the masses. (Until some kind of copyright claim gets filed.) A couple parts are still processing, but they'll all be done soon.
posted by knave at 9:31 PM on December 21, 2008 [6 favorites has favorites]

There is about 20 or 25mins or so of compelling narrative, after all the intro stuff and before the question start around 30:00 - apparently the economy is currently in a "nose dive" retracting at an annualized rate of 6% shedding something like 600k jobs a month and no one knows where the bottom is. He fears 2009 because it will take 6 to 12 months for stimulus to take effect, he is more optimistic of 2010 since by then the stimulus will be taking effect, but he is unsure of after 2010 - govt stimulus is stop-gap, there needs to be a real economic driver - WWII broke the depression, what will it be for us?
posted by stbalbach at 9:40 PM on December 21, 2008

there needs to be a real economic driver - WWII broke the depression, what will it be for us?

Pleeeease let it be marijuana decriminalization.
posted by TrialByMedia at 9:51 PM on December 21, 2008 [6 favorites has favorites]

I'm about 5 pages away from finishing his new book. Highly recommended. Easy to read and explains things well. Assumes you understand a little basic economics. He must be an awesome student. Remind me to take a class from him whenever I go to Princeton.
posted by neuron at 9:59 PM on December 21, 2008

Pleeeease let it be marijuana decriminalization.

I think the idea is to INCREASE the GDP.
posted by chakalakasp at 10:00 PM on December 21, 2008 [1 favorite has favorites]

Krugman fans will enjoy last week's This Modern World.
posted by neuron at 10:01 PM on December 21, 2008

I think the idea is to INCREASE the GDP.

yup, a spliff is a pretty good substitute good. Heroin is probably the perfect substitute good.

This is pretty much half the moral basis on the War on Drugs from the 1970s. The other half stems from it being the demon-weed in place of "Demon Rum" of a century ago.
posted by troy at 10:12 PM on December 21, 2008

there needs to be a real economic driver - WWII broke the depression, what will it be for us?

PK also evinced surprise at the fact that the depression didn't return after WW2, but from my reading I thought the postwar era kinda sucked economy-wise, since we didn't have Europe or Asia to sell to and demobilization meant mass unemployment and displacement. Then of course everybody in the world needed our stuff (& everyone was making babies) so we began the great postwar boom that ran through to 1967 or so.

I don't have any clear idea what's going to happen, but I do have a long term position in "cheap" Jan 2010 and Jan 2011 BAC calls now, so that at least betrays a positive bias.

It wouldn't surprise me to see a $20T national debt and a $20T GDP number and a $5T/yr national budget (and a $25T M3) by the end of Obama's 1st term.

If I were the Economy Czar I would deploy this spending directly toward national superrail, light rail, subway, energy storage, solar, wind, nuclear fission & fusion, defense.

The finance sector has been skimming off 30% of the GDP for far too long. Time for them to start contributing wealth and not being the total leechfucks they are -- so I would mitigate the financial shock by targeted, graduated taxation on rentiers of all stripes, eg. a national LVT surcharge of say 0.1% of unimproved value, rising 10bps per year for three decades.

If I were Czar, of course.
posted by troy at 10:24 PM on December 21, 2008 [1 favorite has favorites]

From the first video, in the Q&A, Krugman says (in response to the question "can you really misspend a government stimulus package?" -- said with great incredulity):

Ya, I mean, other things equal, it should be spent well, if it can. But no, this is where.. but ah.. What, sorry? Well, it should be on stuff, if you can, on stuff that is actually valuable. [very quietly] So, we really do have bridges falling down, and we should fix them, and all that. [..., normal volume] Keynes wrote, talking about the reluctance to spend on projects, and all the complaints people had, "We can solve this by burying bottles full of cash in coal mines, and letting the private sector dig them up." And he said, "it would be better to spend it on something useful". He said, "but if that's the only thing people accept, let's do that."

Until economics can figure out why this is absurd, it will never be more than pseudo-science. It reminds me of Star Trek..
posted by Chuckles at 11:32 PM on December 21, 2008

Things are going to be tough, massive government spending on bridge and highway projects is problematic because we can't kick it into effect overnight, things are going to suck camel dick for about another year, and then hopefully we can start climbing out of this hole, even when we do emerge we'll have fuck-tons of debt to deal with, and the private sector's ability to recover is kind of a question mark.

I like Krugman, but I thought this video was fairly meh all around.
posted by bardic at 11:50 PM on December 21, 2008

I think my comment misses the mark.. Economics is like math, but what we need is physics. Models are all well and good, but they aren't reality. Can not be reality. There is a vocal group of Matrix fanboys and Singularity theorists who can't seem to process that fact -- whence comes Long Term Capital Management. In lieu of an economic 'reality' to test theory against, we have regulation. Ya.. that might be a better description of what we're seeing.. no wonder we are doomed :)
The Q&A was better than the talk..
posted by Chuckles at 12:07 AM on December 22, 2008

Krugman: "I don't do stock quote estimates and I don't do Microsoft."

Heh.
posted by gen at 12:25 AM on December 22, 2008

The finance sector has been skimming off 30% of the GDP for far too long. Time for them to start contributing wealth and not being the total leechfucks they are -- so I would mitigate the financial shock by targeted

This is a huge part of the problem. They are total leaches, contributing nothing and taking immense bonuses.

Apparently some swiss banks are paying their employees bonuses in garbage CDSes. That could be one solution, pay banker's bonuses in whatever it is they are buying, and don't allow them to sell until the fund itself sells. Or just tax the hell out of them (i.e. 75% for bankers bonuses) and use the money for investment in real stuff.
posted by delmoi at 12:25 AM on December 22, 2008

> "We can solve this by burying bottles full of cash in coal mines, and letting the private sector dig them up." And he said, "it would be better to spend it on something useful". He said, "but if that's the only thing people accept, let's do that."

Until economics can figure out why this is absurd, it will never be more than pseudo-science.

Well, I think economists like to point out such absurdities because, at the end of the day, they're trying to look at things with a dispassionate and scientific eye. You could execute fiscal stimulus in any number of ways, but it is society or government or whatever which decides whether or not the the tactic is "good", "bad" or "absurd." Burying money in mines is absurd because we as a society value job creation. But so-called scientists don't care. They only measure the results. During the Q/A session at the end, Krugman seemed to indicate that he didn't care one way or the other whether or not fiscal stimulus was put towards military buildup, rather than towards new bridges, because the end result would (hopefully) be the same.

As well, Krugman's body posture wasn't particular telling. He looked like a guy deep in thought with a lot to say, and not much time to say it. His lowered eyes indicated he was lost in thought, channeling out an interior monologue.
posted by KokuRyu at 12:31 AM on December 22, 2008

Well, he didn't say Microsoft, he said "I don't do stock price forcasts.. or [W,w]indows." I was really puzzled by the line.. Did he really mean Windows^TM? I'm still puzzled.
posted by Chuckles at 12:34 AM on December 22, 2008

Burying money in mines is absurd because we as a society value job creation.

To me, Krugman was saying that burying bottles of money and then digging them up IS job creation. That's why he spent so much time relating percent of GDP in stimulus to percent of unemployment. I can see your side of it too though, considering his response to the question "Do we need a middle class?" The same incongruity seen from a different direction?
posted by Chuckles at 12:40 AM on December 22, 2008

"I don't do windows" = "I don't give advice on when to get in and out".
posted by Wolof at 1:15 AM on December 22, 2008

fiscal stimulus was put towards military buildup, rather than towards new bridges, because the end result would (hopefully) be the same

no, he was talking short-run results, not end results per se. WW2 was great for instantly employing anybody who could hold a rifle or peel a potato, and PK was making the point that from an economist's sterile technical view a make-work job now is better than a value-add job in 2011.

While the vast expenditure in fighting WW2 created some wealth (new industrial capacity) and quasi-wealth like intellectual capital (industrial processes, aeronautics, fission, radar, etc etc) and competitive advantage over our erstwhile trade partners we really didn't get a lot of material goods in return for the vast quantity of inputs (manpower, oil, steel, rubber, etc) we expended in the enterprise.

For end results, PK was talking about value -- or economic value of what is produced from government stimulative expenditure. We value a bridge because it makes getting from point A to point B more efficient, saving time and energy. The Iraq War has already cost $650B+, plus several trillion in veterans benefits that will be paid for the remainder of this century, for precious little value-add in return -- that was one expensive hanging -- the opportunity cost of what we could have done with that $650B to create physical capital wealth (trains, new technologies, etc) and social capital (health services, education) is of course staggering. . . so staggering that the mind of the thoughtful person must blot the implications out to continue functioning really.
posted by troy at 1:36 AM on December 22, 2008 [3 favorites has favorites]

"If we threw even one tenth of one percent of this thing [i.e. stimulus packages] at culture, what wonderful things could happen? But I've got the suspicion it just can't be done in this modern world, that the culture wars are just too intense for us to do that."

That's literally the most depressing thing I've heard in months.
posted by Happy Dave at 2:22 AM on December 22, 2008 [1 favorite has favorites]

^ antinysterical
posted by troy at 3:07 AM on December 22, 2008

Ah very interesting - I haven't been able to push through the Krugman videos yet, but I've read the summary linked to above. Many thanks.

On a related note, this morning Bloomberg had an installment of their First word on 2009 series. I can provide notes that I took for my own purposes here. Keeping in mind some folks in this thread were asking after recommendations I've rejiggered my notes a little (they talked about investment opps at the end of the interview).

This AM we're seeing 3M TBill trading to yield -0.01%, with the hot run 10Y yield rapidly approaching 2% (currently trading to yield 2.15%). Most of Asian equity markets were down overnight with only The Nikkei finishing up.

A sign of the times? Toyota is posting it first loss in 71 years. Of course GM & Ford shares are getting whacked in European trading.

Seems like everyone is dressing up their books for end of year, and nobody wants to be holding anything but US Treasuries.

About five minutes ago on my Bloomberg (but not on the wire services yet it seems); China just cut by 27bps. Meanwhile, The Ruble is tanking big time.

Anyhow, my (crude) notes. They reinforce some of Krugman's points, differ on a few others.

Once again, I've moved the investment advise to the start.


-- start of investment advise

MOD - Investment portfolio for the coming storm - commodities as an asset class?
Roubini
Bearish about commodities first half
Due to recession
15% to 20% of prices in 2009
maybe recovery in seond half
weak recovery

O'Neill
Short Dec crude futures
Commodities tied to dollar
Quantitaitve easing will kill dollar
Dollar is going down
Fed is more aggressive about printing money
Trade deficit still in place getting worse in near term
Supply of dollars
Gold recovery into 2009
Will pull oil along starting second half

Roubini
Dollar down as well
sees another $3T fiscal response 2009
another $3T 2010
Higher rates on long end of yield curve
Inevitable

MOD - Sterling?
O'Neill
Its front page news now
and that usually indicates any collapse is over
Pound is cheap
dropped more than ERM debacle
Long pound

MOD - Roubini is pound cheap?
Roubini
depends on BOE actions , housing markets
consumer tapped out
Still bearish on pound

MOD - Assets classes fallling across the board - where to park money in 2009?
O'Neill
Domestic Chinsese equities
Buy basket of top 25 Corporate bonds

Roubini
Buy non leveraged
spreads will correct
may widen in short temr
Credit cheap relative to equitiies
Equities still overpriced
Downside surprises possible
looking at US equity 15% declines

-- actual start of interview

MOD - We've seen nothing like this before
Introduces participants

Roubini - predicted recession back in 2006, sees more bad news ahead
O'Neill - Introduced concept of BRIC economies, still sees hope there

Roubini
Pretty bad - global recession - more severe in US
2010 recovery
EU, UK hit not as much as US
Emerging economies hit
Deflationary forces dominant

O'Neill
Agrees with Roubin
Severe recession by modern standards
Entire developed world
Thinks developing world will still grow
China 7.5% 2009
India 8% 2009
Good chance of upside to these numbers


Roubini
No depression because of government interventions
Supply glut vs demand leading to shallow recovery
deflationary forces dominate

O'Neill
BRIC consumers will save the world
Sees Chinese consumers stepping in
Chinese retail sales still growing at a rate of over 20%
Chinese government deploying stimulus as developing worlds slow
Current events good - US consumers must rebuild savings rate


MOD - Quantitative easing - impact?
Roubini
Quantitative easing in motion longer than Fed admits
Fed not revealing true scope
Will maintain Fed Funds at zero target in 2009

O'Neill
Economics once again proven dismal science
Bernanke expert in deflation
Very active response
US Policy response very impressive
Rest of developing world lagging
ECB has Maastricht strings -
Trichet can't move as fast as Bernanke
ECB lacks independence
Germans slowing response
US based crisis but EU economy just as weak

Roubini
ECB behind the curve
Sees sharp cuts in 2009
Fiscal response needs to be intensified
Sees Germany leading the way
Economic contraction in Euro zone could be worse than US

MOD - Government Deficits? Brown / Darling say they don't matter - is this correct?
O'Neill
Absolutely correct
Higher bond yields are the problem
Wants Merkel to send all Germans maps of shopping malls with a tax cut
Germany has the resources
Germany must spend money
pull EU out

-- interview ends

posted by Mutant at 3:10 AM on December 22, 2008 [3 favorites has favorites]

I always thought that the reason the Great Depression didn't restart after WWII was that 60-something million workers were killed and the factories they worked in all blown up. Rebuilding from that would seem to require a large amount of employment.
posted by moonbiter at 3:18 AM on December 22, 2008

I also think it's a bit of a strawman to say that we don't know why the US economy continued to grow after 1945. First, we had another war five years later. Second, under Eisenhower, the national highway system was built. That was a huge public works project that went hand-in-hand with Detroit going back to building cars rather than tanks. Throw cheap gasoline on top of that, and the fire was lit, so to speak.
posted by bardic at 3:43 AM on December 22, 2008

Overthinking (plate of beans) on his "I don't... do windows" comment. It was a little joke: The cleaning lady you hire always says "I don't do windows". It is considered either specialty work or something that is too much a pain in the patooti to do, so it is one job that you would think the cleaning lady would do, but she refuses to do it. The equivalent for Krugman is apparently "I don't do stock forecasts".
posted by spock at 4:26 AM on December 22, 2008 [1 favorite has favorites]

The main driver to the economy in the post-WWII world was women in the workforce in much greater numbers than pre-WWII. That only increased as time went on.
posted by spock at 4:29 AM on December 22, 2008

If I were the Economy Czar I would deploy this spending directly toward national superrail, light rail, subway, energy storage, solar, wind, nuclear fission & fusion, defense.

This is hopefully the kind of good-sense thinking that I sincerely hope Obama's team employ. You could do this in any number of ways, but the equation is basically the same.

Pick a problem, any problem. Let's say... energy.

If you threw $800 billion at energy, you could probably walk away with at least a couple of high-priced items. Maybe a couple of hydro electric plants. Maybe $800 billion of free solar panels. Who knows? The point is, you can throw $800 billion at a banker, and like a magician they can make your money disappear. But throw $800 billion at an engineer, and at the very least, at the end of it all, you still have stuff you can point to and say, "Well, at least we got that out of it."
posted by Civil_Disobedient at 5:19 AM on December 22, 2008 [6 favorites has favorites]

WWII broke the depression, what will it be for us?

See that's the problem with sequential naming conventions. What comes next? WWIII, natch.

The terrible thing is, one way or another, it's probably true.
posted by dirtdirt at 6:14 AM on December 22, 2008

The terrible thing is, one way or another, it's probably true.

Water Wars, Energy Wars, Real Estate Wars. Can't keep funneling the entire world to a fraction of a fraction of a percentage of its population, without endless war.
posted by Blazecock Pileon at 6:42 AM on December 22, 2008 [2 favorites has favorites]

But throw $800 billion at an engineer, and at the very least, at the end of it all, you still have stuff you can point to and say, "Well, at least we got that out of it."

Yeah, but you buggers will still complain afterwards that you wanted it in red... :-)
posted by Nice Guy Mike at 11:14 AM on December 22, 2008 [2 favorites has favorites]

Bailed-Out Banks Can't Track Where They're Spending The Money
posted by homunculus at 3:40 PM on December 22, 2008

White House Philosophy Stoked Mortgage Bonfire
posted by homunculus at 5:38 PM on December 22, 2008

Krugman: Life Without Bubbles
posted by homunculus at 5:39 PM on December 22, 2008

If you threw $800 billion at energy, you could probably walk away with at least a couple of high-priced items. Maybe a couple of hydro electric plants. Maybe $800 billion of free solar panels. Who knows? The point is, you can throw $800 billion at a banker, and like a magician they can make your money disappear. But throw $800 billion at an engineer, and at the very least, at the end of it all, you still have stuff you can point to and say, "Well, at least we got that out of it."

The money doesn't just "disappear," it's just that its path is more complex. A bad investment ideally just means some company got money who ultimately discovered that they couldn't successfully pay it back. I.e.: you just paid to give some people jobs that didn't ultimately produce enough to justify your investment.

If you throw money at engineering and lose it, again, it means that you gave an engineer a job, but they didn't produce enough to justify your investment. Maybe they built a generator, but the energy consumed by everyone involved in designing and building the generator was more than the generator would ever produce. (A simplified example; obviously, in reality, the problem might be far more complex than that.)

In the current crisis, I think everything goes back to home loans. Your money went to give a bunch of people nice houses, but those people couldn't pay for the houses because they were not employed productively enough to ultimately warrant the construction of lots of nice houses.

Right?
posted by Xezlec at 10:43 PM on December 22, 2008

In the current crisis, I think everything goes back to home loans. Your money went to give a bunch of people nice houses, but those people couldn't pay for the houses because they were not employed productively enough to ultimately warrant the construction of lots of nice houses.

Right?

Well, not quite. Most of the 'lost' money was the result of side-bets on the likelihood of those home loans defaulting, many of them taken out by people with no rights or ownership to the actual loan revenue. Thousands of unregulated side-bets, with nothing behind them apart from a mutual assumption of credit-worthiness.
posted by Happy Dave at 1:17 AM on December 23, 2008

Well, not quite. Most of the 'lost' money was the result of side-bets on the likelihood of those home loans defaulting, many of them taken out by people with no rights or ownership to the actual loan revenue. Thousands of unregulated side-bets, with nothing behind them apart from a mutual assumption of credit-worthiness.

Yes, but they were also bundled into products which were bought by what is normally thought of as very stable entities, like munis. A lot of the credit was split into tranches which was rated top to bottom, and then the tranches were re-split, and so the "good" bad debt was given a good rating, and therefore a lot of the garbage ended up with very high ratings. So, of course when you're buying debt and it's AAA rated, well, it seems like a safer bet than a regular stock, and municipalities will take these sorts of "safe" bets with money used for government spending, except in this case the bundled and tranched mortgage debt was largely toxic. If the people doing the ratings are honest, you don't end up with this sort of problem, as buying debt can be a good thing if it's done correctly. In fact, right now a lot of the smart money managers are trying to get people to look at corporate bonds, another form of debt, and right now with very high returns due to all the money flowing to cash (e.g., Treasurys with negative yield).
posted by krinklyfig at 6:23 PM on December 23, 2008

Face The Nation: Paul Krugman Says There's Hope For Our Economy--If We Get Real About "Bipartisanship"
posted by homunculus at 12:41 PM on December 29, 2008

Maddow: Krugman on Why the Stimulus is Important
posted by homunculus at 12:41 PM on December 30, 2008

Asserting FDR "waged ... a jihad against private enterprise," Hume falsely claimed "everybody agrees ... that the New Deal failed"
posted by homunculus at 5:00 PM on January 9

The Obama Gap
posted by homunculus at 5:07 PM on January 9

What Obama Must Do: A Letter to the New President
posted by homunculus at 7:20 PM on January 19