Politics & economics – Dec 21

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White House Philosophy Stoked Mortgage Bonfire
Jo Becker, Sheryl Gay Stolberg and Stephen Labaton, New York Times
The global financial system was teetering on the edge of collapse when President Bush and his economics team huddled in the Roosevelt Room of the White House for a briefing that, in the words of one participant, “scared the hell out of everybody.”

It was Sept. 18. Lehman Brothers had just gone belly-up, overwhelmed by toxic mortgages. Bank of America had swallowed Merrill Lynch in a hastily arranged sale. Two days earlier, Mr. Bush had agreed to pump $85 billion into the failing insurance giant American International Group.

The president listened as Ben S. Bernanke, chairman of the Federal Reserve, laid out the latest terrifying news: The credit markets, gripped by panic, had frozen overnight, and banks were refusing to lend money.

Then his Treasury secretary, Henry M. Paulson Jr., told him that to stave off disaster, he would have to sign off on the biggest government bailout in history.

Mr. Bush, according to several people in the room, paused for a single, stunned moment to take it all in.

“How,” he wondered aloud, “did we get here?”

Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, “faced with the prospect of a global meltdown” with roots in the housing sector he so ardently championed.
(20 December 2008)

The depression of 1929 is the wrong model for the current economic crisis [This link is no longer active. For an explanation of the panic of 1873 see here.]
Scott Reynolds Nelson, Chronicle of Higher Education
As a historian who works on the 19th century, I have been reading my newspaper with a considerable sense of dread. While many commentators on the recent mortgage and banking crisis have drawn parallels to the Great Depression of 1929, that comparison is not particularly apt. Two years ago, I began research on the Panic of 1873, an event of some interest to my colleagues in American business and labor history but probably unknown to everyone else. But as I turn the crank on the microfilm reader, I have been hearing weird echoes of recent events.

When commentators invoke 1929, I am dubious. According to most historians and economists, that depression had more to do with overlarge factory inventories, a stock-market crash, and Germany’s inability to pay back war debts, which then led to continuing strain on British gold reserves. None of those factors is really an issue now. Contemporary industries have very sensitive controls for trimming production as consumption declines; our current stock-market dip followed bank problems that emerged more than a year ago; and there are no serious international problems with gold reserves, simply because banks no longer peg their lending to them.

In fact, the current economic woes look a lot like what my 96-year-old grandmother still calls “the real Great Depression.” She pinched pennies in the 1930s, but she says that times were not nearly so bad as the depression her grandparents went through. That crash came in 1873 and lasted more than four years. It looks much more like our current crisis.
(17 October 2008)
Satirist Ambrose Bierce once said, “War is God’s way of teaching Americans geography.” With equal truth, we might say that recessions are God’s way of teaching Americans history and economics. -BA

‘Greek Syndrome’ is catching as youth take to streets
John Lichfield, Independent
First it was Athens. Now the Continent’s disillusioned youth is taking to the streets across Europe. —
Europe exists, it appears. If Greek students sneeze, or catch a whiff of tear-gas, young people take to the streets in France and now Sweden. Yesterday, masked youths threw two firebombs at the French Institute in Athens. Windows were smashed but the building was not seriously damaged. Then youths spray-painted two slogans on the building. One said, “Spark in Athens. Fire in Paris. Insurrection is coming”. The other read, “France, Greece, uprising everywhere”.

It was a calculated and violent attempt to link disparate youth protest movements. Links between protests in Greece and France – and, to a lesser degree, unrest in Sweden – may seem tenuous, even non-existent. But social and political ailments and their symptoms transmit as rapidly as influenza in the television, internet and text-message age.

With Europe, and the world, pitching headlong into a deep recession, the “Greek Syndrome”, as one French official calls it, was already being monitored with great care across the European Union. The attempt to politicise and link the disputes across EU frontiers may prove to be a random act of self-dramatisation by an isolated group on the Greek far left. But it does draw attention to the similarities – and many differences – between the simultaneous outbreaks of unrest in three EU countries.
(20 December 2008)
Late breaking news:
Hundreds of Greek protesters clash with police (Reuters)
Fresh Violence Rocks Greece (VOA)

-BA

The Revolt of a Disappointed Generation
Manfred Ertel and Daniel Steinvorth, Spiegel (Germany)
The violent unrest that followed the shooting of a 15-year-old boy has driven Greece to the brink of a political crisis. The rioting marks an explosion of rage by the country’s young people who have few prospects of carving out a place in a society where all initiative is stifled.

The mood in the jam-packed auditorium was reminiscent of the student protest movements of 1968. Hundreds of young people thronged their way into the dark room, sat on the steps or stood on tables. They shouted “murderers” and “pigs” — and thunderously applauded calls for revenge. Cigarette smoke and the smell of sweat hung heavily in the air.

Jorgos Barutas, 29, had to struggle to make himself heard. The computer engineer, sporting a five-day beard and steel-rimmed glasses, stood at the foot of the steep rows of seats and shouted up to the audience with a throaty voice. “We have to hold out until the government steps down.” Applause. “We have to transform the protests into a political movement.” Applause. “We have to formulate political objectives.” Followed again by thunderous applause. Barutas stepped down from the stage, feeling satisfied, and the students poured out of the hall.

Outside on the campus of the Athens Polytechnic University such lofty political statements are quickly forgotten. Fires blaze and the smoldering remains of hastily erected barricades block the paths between lecture halls. Figures dressed in black and wearing ski masks use threatening gestures or engage in pushing matches to keep strangers from entering.

… It is day five of the intense rioting by young people in Athens. The protests began in the district of Exarchia — a traditional haunt of artists, anarchists and left-wing intellectuals — and rapidly spread throughout the entire country. They have also sparked violent unrest in the large cities of Thessaloniki, Patras and Heraklion — and in 20 other Greek towns.

… A Growing Prosperity Gap Between Young and Old

… To make matters worse, Greece faces a shaky economic situation. Although growth has averaged 4.3 percent since 2000, Greece has one of the highest inflation rates in the euro zone, at 4.5 percent. The unemployment rate of 7.5 percent remains within European norms, but the prosperity gap between the older generation — senior workers and civil servants — and young people who are fresh out of school continues to grow. Nearly a quarter of all adults under the age of 29 are unemployed.

The current crisis has not only hit the traditional losers of modernization, such as individuals from educationally disadvantaged social strata or immigrants. This time around university-educated young people from well-off middle-class families also have to work odd jobs to keep their heads above water.
(15 December 2008)
Long article – better than most of the coverage in the English-language press.