Everyone reads what others think about what is happening to the economy or what is being done to address the economy or when the economy is going to improve. It is hard to avoid the elephant in the room! We are all impacted by the economy and are concerned about the future.
I have had my opinions about what should be done. I have agreed with some of the economic gurus and disagreed with others. Since no one can be sure about what to do, it is hard to dispute any view.
Simon Johnson is a very unusual economist. He has a long and distinguished history at the IMF and is now at MIT. He regularly shares his view on his blog. His new article in the Atlantic, however, is worth reading even if it is most disturbing.
In this lengthy article, he references his work at the IMF and how the IMF dealt with other nations facing economic circumstances similar to our own. Ultimately, his concerns are very serious because never has the global economy been impacted as now. Concerns that the Eastern European banks will bring down the rest of Europe and our failure to address the failures of our nation's banks result in questions whether this economic downturn will exceed the dimensions of the great depression.
There are two points in particular that are worrisome.
One, like Krugman and others, he stresses the need to "nationalize" the distressed banks and see the restructured banks preferably to many investors that create smaller banks from the original whole. Banks too big to fail are, in fact, too big to exist.
Second, he is concerned that the financial oligarchs have too much power and, until they are brought down, there will be problems in our recovery. The ties between Wall Street and Washington have been long-standing, i.e., people transition from one to the other seamlessly, e.g., Rubin and Paulson and our present Secretary of the Treasury. As in all other instances where nations are rescued by the IMF, there is a need to restore justice by getting rid of these oligarchs.
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