Alan Greenspan -- the former longtime chairman of the Federal Reserve Bank and a staunch free-market, laissez-faire capitalist -- has said publicly that the US may need to nationalize parts of the banking system to turn around the current economic crisis. This is like the Red Sox walking over to the Yankees' dugout during a baseball game and asking to use their opponents' bats because they are superior.
Greenspan, one of the architects of US fiscal policy during his nearly two decade reign as Fed chair, has been cited by Nobel Prize-winning economist and New York Times columnist Paul Krugman as the individual most responsible for the current economic crisis. A couple of months ago Greenspan sat before a Congressional committee and admitted that he was wrong in assuming that banks and other financial institutions would regulate themselves.
There seems to be a general feeling building that nationalization is inevitable and that what has prevented it from happening so far is public opinion. The price tag is likely to be more than a trillion dollars. Do such numbers even matter any more? Has the value of the dollar become meaningless? Will the situation become as bad as the Great Depression? Is all of this an admission that the basic tenets of capitalism are all wrong?
Speaking of the economy, I watched "Inside the Meltdown" on PBS's Frontline a couple days ago, and the program detailed how the economic crisis unfolded and how Ben Bernanke, current Fed chair, and Hank Paulson, former Tresury secretary, walked into a meeting with Congressional leaders and showed them that the entire US economy was standing on a cliff.
And in a recent issue of The New Yorker there is an article called "The Ponzi State," which details the collapse of Florida's housing market in an economy that is based almost completely on outsiders moving in. In effect, says writer George Packer, the Sunshine State is one giant Ponzi scheme. Could this be true of the nation's -- nay, the world's -- economy?