Congress has just made a Really Epic Mistake, or else they have shown firm courage and principle in a difficult time. I wish I knew which it is.
It does seem to me, though, that the cries of “Great Depression! Great Depression!” we have been hearing from bailout backers may be a little too pessimistic. The financial system of the twenties and thirties was nowhere near as globalised as today’s. Most countries were still on the gold standard. Even if a lot of American banks fail, it seems probable to me that European or other capital may come to the rescue in a way that wasn’t possible in the thirties. If so, the big winners are going to be the banks who invested carefully and cautiously, and didn’t take on a lot of mortgage securities. That sounds like a good thing to me. Perhaps we’ll also see various sovereign wealth funds earn quite a bit of money from this; if so, all the better for my Norwegian state pension.