“Get gold, humanely if possible,” King Ferdinand of Spain once said. “But at all hazards–get gold.”
Last week the people on Wall Street in the battle against the gods, for money to ease the suffering, for personal comfort, found out the human condition. The standards of care changed last week. Currencies which had replaced gold as the standard on how things could be valued in the 1970s would now be challenged. Everything was up for grabs. With concern over structures on Wall Street that have fostered sinful ways, excesses, government at this point is working on a new structure for the financial markets, against time, as the financial princes readied to work another week.
“How much? To whom? On what terms? When? Who should get credit this time?” How are the pieces of the financial universe related?
Your reading syllabus:
Charles MacKay’s Memoirs of Extraordinary Delusions and the Madness of Crowds
The New International Money Game
Read Chapter Ten of Charles Kindleberger’s Manias, Panics and Crashes which takes a look at the role of the Federal Reserve in the U.S., as the domestic lenders of last resort. “Kindleberger argues tentatively that ‘a lender of last resort’ (the Federal Reserve) does shorten the business depression that follows the financial crisis.” He also says there is “a presumption . . . that halting a cumulative deflation helps shorten the depression that follows.” One issue that is not addressed in this edition is how such crises may occur more rapidly and with greater amplitude than before due to improved information flows. As a result, it will be more difficult for lenders of last resort to take correct action in a timely way.”
–Don Mitchell
This super power that was unchallenged since the end of the Cold War had found a kryptinite on Wall Street that had looked to destroy us from within. Treasury Secretary Paulson was in search of a lead pipe to contain the 5 investment banks that were for now reduced to two. We had all been brought to our knees.
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