Wednesday, September 24, 2008
A lesson from History
It is said that World War II ended the Great Depression of 1929. This was because of the massive deficit financing that had to go into producing things for the war effort - planes, tanks, ships, etc, etc. in 2 theatres of war - one in Europe and the other one in the Pacific. How much did the US public spend? The consensus seems to be $5 trillion (in 2007 dollar terms, after adjusting for inflation). So when Henry Paulson and Ben Benanke asked for $700 billion from the American people to rescue the world from the next Great Depression, it pales in comparison. America lost more than just money in WWII. It lost many lives and made many widows.
Yet some are not convinced that this is a fair solution. What it meant was that greedy wheelers and dealers - the investment banks and the people that ran them, were going to be let off. God knows how much cash they have already stashed away. If we want to make the comparison, these dealers are the equivalent of the German Nazis and the Japanese banzai troops that wreaked so much pain and destruction on the world more than 50 years ago. And the rest of us - well, we will have to manage as best we can. Our houses lie in tatters, no certainty in our jobs for tomorrow, our life savings gone - just like that.
Yet it is an inevitable solution, fair or not. We just comfort ourselves by saying that the world recovered from its economic malaise once, and the world will recover from this financial malaise again. The only thing is - we must catch and punish the perpetrators of these fraudulent investments products, bring them to justice, as much as the Nazis and Japanese Class X criminals were tried and disposed of.