“Something funny is happening down at the bank…”
Jimmy Stewart in
It’s a Wonderful Life
There’s something funny going on. But it’s not just at the banks.
Friday was a good day on Wall Street. The Dow fell only 127 points. And gold fell $36.
The feds closed a couple banks in Illinois and Michigan. The big banks are not going to close; they’re going to be “recapitalized” — and partially taken over by the government. This process is already underway in Britain. Europe’s leaders got together and said they’d do the same thing.
“Europe agrees to banking rescue,” is today’s front page headline at the International Herald Tribune.
America’s financial authorities are planning the same move. Where in the US Constitution does it authorize the federal government to go into the banking business? Don’t ask…
But there’s nothing very odd about this. The banks did dumb things. Now, the politicians are doing dumb things. Just what you’d expect. The ‘funny’ part is still ahead…
“IMF warns of financial meltdown,” is another major headline. Scanning the rest of the press we see the same sentiment. To hear the press tell it, fear is running wild in the streets.
“Anatomy of Fear,” shouts a Newsweek header. “Can the G7 save the world,” asks TIME.
And all over the world, people are tallying their losses and beginning to sweat.
We don’t have the figures, but it looked to us as though last week must have wiped out more ‘wealth’ than any week in history. Stocks fell on Monday and didn’t stop falling until the rang the bell on Friday. When people dared to open their portfolios on Saturday, they found trillions of dollars missing.
Well, it was just ‘paper profits,’ you might say. Maybe. But it was wealth that people depended on – for retirement, for vacations, for new cars and…even healthcare. And now, it’s gone – poof! What now?
“I’m thinking about going back to work…” says one retiree to the NY TIMES. Another says he will not be able to retire when he had planned.
But these fellows have only just begun to sweat. Jobs were plentiful in the boom years – so easy to get that people assumed they could always find work. That, too, could be changing fast. Unemployment is rising. And after last week, every company executive in America must be considering a freeze on new hiring plans…and cutting unnecessary workers as fast as he can. The typical business spends more on labour than anything else. And in a downturn, labour is the one cost employers can control. So, the marginal worker could soon find himself with no money…no credit…and no job. Go back to work? Where?
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