Paul Krugman: Don’t panic about the stock market... Panic about the credit markets instead

[RedEarth]

Don’t panic about the stock market
Panic about the credit markets instead. Interest rate on 3-month Treasuries at 0.02%; interest rate on high-yield (junk) bonds over 20%.

This is an economic emergency.

http://krugman.blogs.nytimes.com/2008/11/20/dont-panic-about-the-stock-market/

[Double T]

1. The ship is going down and there isn't a damn thing we can do about it.

Anarchy will follow.

[ben_meyers]

2. Not anarchy, war! As has been suggested by Krugman himself

Of course that's pretty much the same thing isn't it?

This may seem hard to believe. The New Deal famously placed millions of Americans on the public payroll via the Works Progress Administration and the Civilian Conservation Corps. To this day we Americans drive on WPA-built roads and send our children to WPA-built schools.

Didn't all these public works amount to a major fiscal stimulus?

Well, it wasn't as major as you might think. The effects of federal public works spending were largely offset by other factors, notably a large tax increase, enacted by Herbert Hoover, whose full effects weren't felt until his successor took office. Also, expansionary policy at the federal level was undercut by spending cuts and tax increases at the state and local level.(snip)

What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy's needs.

This history offers important lessons for the incoming administration.

http://www.iht.com/articles/2008/11/10/news/edkrugman.php

Don't think the lesson will be lost on the worlds "powers that be".

Get ready to kiss your draft age children(male and female up to age 46)goodby.

[Double T]

3. Looks like its time to fire up the 'axis of evil, Part 2'.

Who wants to be the enemy?

[ben_meyers]

4. Oh, I can think of a couple of candidates

How about a European country that was defeated in a cold war but may want to regain control over some of it's lost satellites. And then add in a far east country, with a large population of people that have rising expectations and is losing it's export markets to a world wide global depression. Both of whom may be in need of a dwindling supply of raw materials(oil?). That's just for starters. All that's needed is a spark.

Sound familiar? Nah, couldn't happen again.

[soothsayer]

5. We picked that fight with russia. i thought it was well known now that they didn't just invade

out of the blue.

[girl gone mad]

7. Roubini says the threat of war and civil unrest is very real at this point..

even under the best of circumstances we should expect disruptions and the outbreak of war or political uprisings in unstable regions.

[gravity]

6. The bond markets are acting just like the stock market

It is driven by fear rather than fundamentals in the short run.