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« Previous Entry | Main | Next Entry » Paul Solman Goes Back to School
Editor's note: This week and next, the Business Desk will feature questions from students in three high schools around the country. To kick off the special series, two questions from high school seniors at Central High School in Phoenix, Arizona. Question: How does it happen that the whole world is in a recession? -- Kavion, senior, Central High School, Phoenix, Ariz. Paul Solman: The whole world isn't in a recession. China is growing; so is India; so is Brazil. Among them, those three countries alone have something like two-thirds our GDP and maybe nine times as many people as we do. As to the parts of the world that are in recession -- largely in Europe -- it looks like the reason is because their citizens borrowed and spent "beyond their means." Question: When, why and how did the economy begin to fall? -- Chanessa, senior, Central High School, Phoenix, Ariz. Paul Solman: When: late 2007. Why: easy credit, easier regulation, a national mindset that we could have it all. How: Scam artists got into the act and pushed the economy beyond the breaking point. You know Ben Stein, the guy chained to Shaquille O'Neal in those TV ads? His father, a famous economist, is known for Herb Stein's Law: "If something cannot go on forever, it will stop." -- Posted November 3, 2009 | Comments (1) | Permalink
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It's ironic that you should mention Ben Stein.
Ben Stein is a great example of why this crisis exists. He calls himself an economist, yet his "knowledge" of the reality (Go read Felix Salmon's analysis of each of his columns) is pathetic at best. Also, Stein's ads on TV are for a company running a scam yet not forced out of business by regulators.
The company, incidentally, is a microcosm of Wall Street. They take money, add no value, and have paid off the regulators who would otherwise shut them down.
Greenspan knew this would happen.. his Ph.D. thesis was 800 pages on the history of housing prices in the US. Both he and Phil Gramm are still paid millions each year by Wall Street.. if you don't think they are getting paid off for delivering the policies they promoted, you're wrong.
The entire economy of the US for the past decade+ has been based upon a leveraged one-way bet.. on rising asset prices. Note that the same group of people who started this (Summers, Rubin, Geithner) are still pulling the strings. Until they are thrown out, the US economy will not recover.