Recommended Reading
October 7, 2008
Confused about the rapidly evolving global credit market crisis? Do you wonder how years of very robust economic expansion could transform within a year into the scariest situation in 80 years and how a setback in a fairly small segment of one country’s financial markets could paralyze much of the world economy? The situation has come to this despite sharp preventive rate cuts by the Federal Reserve early this year and countless other on-the-fly initiatives to pump liquidity into markets and to triage institutions that were too big to fail. Today’s launch by the Fed of a commercial paper funding facility holds promise, targeting a critical linkage between financial market difficulties and main street, but so did many actions that preceded this one. And are you puzzled about why the U.S. presidential election is not debating the crisis candidly and in good faith, rather than pussy-footing around the issue? I urge visitors of this site to read The Testing Time, an op-ed article by David Brooks in today’s New York Times. This insightful piece addresses these questions, explores the bipolar collective psychology of financial market traders that is so hard for econometricians to model, and asks what might lie ahead.
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