We have entered a whole new era of creative destruction, folks. Here are a couple of paragraphs from an article in today’s Times:
The Bush administration on Saturday formally proposed to Congress what could become the largest financial bailout in United States history, requesting virtually unfettered authority for the Treasury to buy up to $700 billion in mortgage-related assets from financial institutions based in the United States. …
A $700 billion expenditure on distressed mortgage-related assets would be roughly what the country has spent in direct costs on the Iraq war and more than the Pentagon’s total yearly budget appropriation. It represents more than $2,000 for every man, woman and child in the United States.
And from the Economist:
Ten short days saw the nationalisation, failure or rescue of what was once the world’s biggest insurer, with assets of $1 trillion, two of the world’s biggest investment banks, with combined assets of another $1.5 trillion, and two giants of America’s mortgage markets, with assets of $1.8 trillion. The government of the world’s leading capitalist nation has been sucked deep into the maelstrom of its most capitalist industry. And it looks overwhelmed.
I’ve now read the Times, WSJ, the Economist and the Financial Times, and still I simply cannot get my head around what is happening. I suspect there’s a lot of people who are IN CHARGE of financial institutions and government agencies who can’t, either.
As I argue in my book Slackonomics, it could very well be up to Generation X to bring the economy back from the brink. I guess that was overly optimistic. In fact, it is going to be up to us to rebuild the economy from the ground up.