Published on OpEdNews, by David Griscom, April 8, 2009.
In his NY Times column of 29 March, Paul Krugman recalls the Time Magazine cover from 10 years ago that glorified Robert Rubin, Alan Greenspan, and Larry Summers as the “Committee to Save the World” who had “prevented a global financial meltdown—(thus) far.” Time credited them with leading the global financial system through a crisis, which in Krugman’s words “seemed terrifying at the time, although it was a small blip compared with what we’re going through now.”
In his OpEdNews column of 27 March “History Lesson: And These Are the People We Expect to Fix Things Now?” Dave Lindorff recalls the event that opened the way for today’s financial meltdown. It was the repeal back in 1999 of the Glass-Steagall Act, which had been enacted expressly to prevent the very kinds of malpractice by banks and insurance companies that brought on the Great Depression. Much of Lindorff’s material was drawn from a 5 November 1999 article in the New York Times by Stephen Labaton, from which I’ve selected three quotes below.
Then-Treasury Secretary Larry Summers (who is presently Director of President Obama’s Economic Council and a chief architect of the current multi-trillion-dollar bailout/giveaway to A.I.G. and the giant banks): …
… Yet the mainstream media repeatedly touts U.S. Treasuries as “ultra secure” investments. This makes me wonder … Are the “masters of the universe” and their media arm setting up to con Americans into transferring what little is left of their retirement savings into “ultra safe” Treasuries … where they will be exposed the crash of the dollar? In such an event, the already ultra-rich bankers and hedge-fund managers would be positioned to make still another killing by cashing the CDS they’ve written against working America’s last stash. This day could well come if and when foreign governments sense the dollar is doomed and begin dumping their U.S. Treasury holdings.
But Paul Krugman in his column of April 2nd (thankfully not April 1st!) argues that the Chinese simply own too many T-bills ($2 trillion worth) to even think of selling them, knowing that this would create a panic causing the whole world to sell off their T-bills, instantly driving their values into the abyss (while kicking U.S. interest rates into the stratosphere). So I sure hope he’s right about China’s Dollar Trap. (full text).
David Griscom: Ph.D. in Physics, Brown University, 1966. Fellow, American Physical Society. Fellow, American Association for the Advancement of Science. Fellow, American Ceramic Society. Research Physicist at Naval Research Laboratory (NRL), Washington, DC, 1967-2001. Fulbright-García Robles Fellow at Universidad Nacional Autónoma de México, 1997. Invited Professor of Research at Universités de Paris-6 & 7, Lyon-1, et St-Etienne (France) and Tokyo Institute of Technology, 2000-2004. Adjunct Professor of Materials Science and Engineering, University of Arizona, 2004-2005. Principal, impactGlass research international, 2005-present. (on OpEdNews). Find him also on (ImpactGlassResearchInternational).