The best explanation I’ve read for the Wall Street Meltdown.

I said before that I don’t really understand the economics of the financial crisis the country is currently in the midst of, but Jim Wright over at Stonekettle Station sets me straight:

Hubris, the belief that great men dare greatly, and that should disaster fall, those great men should be rescued at the expense of others, set back on their feet, and allowed to try again.

And Hubris, my friends, is exactly what brings us to the current disaster unfolding in the United States financial sector today.

Just like with the Titanic, prideful greedy men set on us a course for disaster. Those captains of Wall Street, in their pride and arrogance, deliberately ignored the lessons of history, 1929, the S&L crash of the 70’s, the Dot Com bust of the 90’s, and all the rest of it. They ordered the boilers lit and the throttles pushed hard to the stops, in order to line their own pockets and to advance their own hubris, and they took all of us down here in steerage along for the ride.

And when we slammed head on at full speed into the iceberg, those arrogant bastards were the first ones to the lifeboats, – or the golden parachutes, choose your own analogy here – demanding safe passage from the crew, or in this case, the government, as they believe is their right.

And, just exactly like the pride of White Star Lines, there’s not enough lifeboats to go around, and a lot of us are going to be left to sink or swim in the icy wine dark water.

OK, I’ve pushed the Titanic analogy to the breaking point – but the comparison is apt.

Now that’s terms I can wrap my head around. Jim goes on to explain the why of why we need to bail out Wall Street even though it would be more satisfying to let it crash and burn. Jim doesn’t have a lot of solutions, but then, like me, he’s not an economics expert. He does have an excellent grasp of the situation and why it’s a problem and why we need to do something about it and how anything we do is going to be far from a perfect solution. All of which helps me to put it into sharper perspective myself. It’s a good read. I’ll be adding Jim to my blogroll.

NYT on the Wall Street Meltdown, what happened, and why it’ll affect all of us.

If, like me, your knowledge of economics is only slightly better than John McCains then you may be wondering just what the hell happened on Wall Street recently that has everyone freaking out. The New York Times Freakonomics Blog have kindly put together a F.A.Q. to help us out. The whole thing is worth a read, but here’s the gist of why it matters:

I do not work at Lehman or A.I.G. and do not own much stock; why should I care?

The concern for the man on Main Street is not the bankruptcy of Lehman, per se. Rather, it is the collective inability of major financial institutions to find funding.

As their own funding dries up, the remaining financial firms will be much more cautious in extending credit to normal firms and individuals. So even for people whose own circumstances have not much changed, the cost of the credit is going to rise. For an individual or business that falls behind on payments or needs an increase in short-term credit because of the slowing economy, credit will be much harder to obtain than in recent years.

This is going to slow growth. We have not seen this much stress in the financial system since the Great Depression, so we do not have any recent history to rely upon in quantifying the magnitude of the slowdown. A recent educated guess by Jan Hatzius of Goldman Sachs suggests that G.D.P. growth will be just about 2 percentage points lower in 2008 and 2009. But as he explains, extrapolations of this sort are highly uncertain.

In short the American financial market is in deep shit at the moment and it’s going to affect all of us in one way or another.

Just a friendly war reminder…

The cost of the war is just about to break $15 billion a month.

Let me say that again: $15 BILLION DOLLARS a MONTH!! That means in two months time we will have spent the entirety of the cost the expansion to SCHIP that Bush vetoed a little while back. Of course we couldn’t afford that expansion. We’re busy wasting it on the war. Too bad it only buys us two months worth of expenses.

Oh, and as of December 26th we’re up to 3,900 dead American soldiers to boot. Happy New Year!