Editor's corner/ Over a cup of tea
Heidi M. Pascual*
Publisher & Editor
* 2006 Journalist of the
Year for the State of
Wisconsin (U.S.-SBA)
These are very tough times. We Americans are tightening our belts further as the cost of gas continues
to soar (as of this writing, $3.10/gal), with its domino effect on food, transport, and all other
commodities and services. Health care costs are at a record high. Thousands of people are losing their
homes. Unemployment rates are increasing. Wages are stagnant. Crime is up. The dollar’s value is
falling fast, while oil and gold are going up, up, and away from our reach. We are entering a recession,
or maybe, we are already there. Our spirits are getting lower and lower as days pass. We’re losing our
faith in our government, whose solution at this point is minimal intervention, or actually, inaction. What
can $300 or $600 of tax rebates do to stimulate our economy? It’s not even enough to pay one’s
electric bill for a wintry month in Wisconsin!
  OK, the Federal Reserve has lowered by 2.25 point (the lowest in 4 years) the interest rates it charges
Wall Street investment banks that recently got a $100-billion loan from the Feds, and just approved a
$30-billion loan to JP Morgan Chase & Co. to purchase the bankrupt Bear Stearns & Co., the nation’s
fifth largest investment bank. However, as a recent NY Times editorial wrote, “They cannot save
defaulting homeowners, transform bad mortgage loans into good ones, or do the same for hundreds of
billions of dollars of securities tied to those loans.”
  And looking at these billion-dollar figures, I can’t help but think of the billions of dollars of taxpayers’
money (that would soon reach $3 trillion!) that our country spends on the Iraq War, plus billions more on
interfering with other countries’ internal political problems.
  Take a look too at the fact that foreign countries own billions of U.S. Treasury bonds as well as U.S.
assets in real estate and equities. Do you wonder which country directly finances U.S. subprime housing
debt? I don’t. In fact, I fear that U.S. financial institutions would end up being owned by foreign
governments if our government doesn’t act fast.
  The top issue of the day is our economy, and it should be the top priority of our government. Pres.
George Bush, in his weekly radio address on March 15, reportedly said that “the government needs to
guard against going too  far to fix it.” (cbsnews.com/stories/2008/ 03/15) But our economic situation has
gone too far, the worst in many decades, so it requires a major public policy intervention that can only
come from our government!
  Nouriel Roubini, a professor of economics and international business at New York University's Stern
School of Business, compared our present economic woes with some recent financial crises,  and
concluded that it's worse than 1987’s stock-market crash; worse than the late 1980’s savings and loan
crisis; much worse than the 1998 Long Term Capital Management crisis (which was a liquidity problem,
while today, we have insolvency problems); much worse than the tech bust of 2000 and 2001. Roubini
warned that in terms of systemic risk and the risks of a financial meltdown, one almost has to go back to
the Great Depression of the 1930’s to find a good analogy (recession.org).
  I shudder at the thought!  
  But another economics professor at Yale University and a co-founder of MacroMarkets LLC, Prof.
Robert J. Shiller, agrees. Shiller said that the best historical analogy to today's situation is the bubble
that developed and deflated throughout the 1920s and '30s, particularly in the housing market, and an
explosion of easy credit. “In fact, mortgage defaults were a substantial part of the Great Depression,”
Shiller wrote in his comments titled “Innocent Victims,” also posted at recession.org. The crucial
difference, he said, was that the government back then did a lot more to cushion the fallout, instituting
major public programs to bail out homeowners, unlike the present administration which has done
almost nothing.
  And that’s only one of the problems the next president of the United States will face.
  Lord, have mercy on America!
Our economic woes