Wednesday, February 27, 2008

The blindness of one

The blindness of one

The Stanford Daily


Wednesday February 27, 2008


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This Issue

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Profs. examine economic decline

Experts assess future, Bush’s fiscal policy

February 27, 2008
By Kamil Dada
President George W. Bush publicly stated yesterday that the U.S. economy was not in a recession and that he believed it would not fall into a downturn. Given that economic reports show that U.S. consumer confidence has slumped to its worst in five years, and home prices fell 8.9 percent last year, his view is not one that everyone shares — including a number of scholars at Stanford.
Emeritus Economics Prof. Joseph Stiglitz, a Nobel-prize winning economist who formerly served as vice president and chief economist of the World Bank, said Tuesday that the U.S. economy is probably in a recession with the housing-market collapse dragging down consumer spending.----
The credit storm which began in July when two Bear Stearns hedge funds were forced to liquidate, has continued to intensify. Last week the noose tightened around auction-rate securities, a little-known part of the market that requires short-term funding to set rates for long-term municipal bonds. The $330 billion ARS market has dried up overnight pushing up rates as high as 20 per cent on some bonds -- a new benchmark for short term debt. Auction-rate securities are now headed for extinction just like the other previously-vital parts of the structured finance paradigm.
The $2 trillion market for collateralized debt obligations (CDOs), the multi-trillion dollar mortgage-backed securities market (MBSs) and the $1.3 asset-backed commercial paper (ABCP) market have all shut down draining a small ocean of capital from the financial system and pushing many of the banks and hedge funds closer to default.
Number of famous economists, they are each planning to be somewhere else when the crash comes which they predict will topple the rich nations like tumbling tenpins into an economic chaos that will make the Great Depression of the Thirties look like good times. It is the arrogance of one, the unyieldedness of the other, the greed of one, the selfishness of the other, the blindness of one, the hardness of the other, and all of these things in some of those involved! In this case, the love of money is at the root of this evil, for it is what drives the forces at work.
Ted Rudow III,MA

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