THERE ARE, IT HAS LONG BEEN AN ARTICLE OF FAITH, no atheists in foxholes. And now, thanks to the remarkable events of the past few weeks, one might confidently attest, there aren't any capitalists in them, either. For when the going gets tough, the tough in commerce, industry and particularly finance get going -- fast as their corporate jets will carry them to Washington, begging to be rescued. Rescued from what? you might well ask. Why from their own folly, of course. Those stalwart stewards of the private sector have undergone a most extraordinary conversion, from the unshakable conviction that government is the problem to the wondrous epiphany that government is the solution. Now, we don't want to get too picayune or prim. The guys and gals who run our great corporations have never been shy about hitting up the public purse for a little something, whether in the form of tax breaks or contracts or even subsidies. But this time is different (to use a phrase certain to evoke guffaws, but, just this once, happens to be true) in both scale and circumstances. On the first score, in responding to pleas, particularly from banks and their kin, Uncle Sam is pulling out as many stops as he can. It's hard to get a decent handle on what this enormous effort adds up to since it seems to grow daily by leaps and bounds and because it has assumed so many different guises, from purchasing or guaranteeing billions worth of wasting assets to massive loans and outright investment. (Which makes you wonder whether the powers-that-be keep discovering new problems or they have only the foggiest notion of what they're doing.) But the sum is incontestably staggering, likely approaching a couple of trillion dollars and counting. And if you toss in the capital transfusions that the French, Germans, Brits et al. are also pumping into the wobbly global financial system, the already burgeoning total swells to numbers not dreamed of in your worst nightmares, something like $3 trillion. The hope obviously is that in the fullness of time (a nice precise span that ranges anywhere from a year to an eternity) when this still-gathering storm blows itself out, the bulk of that monetary lifeline will wind up back in the public coffers. Miracles do happen. If you are one of those trusting souls who think the taxpayers will come through unscathed and with something to show for having put their money at risk besides grudging gratitude, we've got a piece of property with killer views and no neighbors that you can have for a song. Did we neglect to mention it's in lovely, downtown Chernobyl? What makes the circumstances the improvident lenders have gotten themselves into so special is the virtual shutdown of credit, which, for better or worse and right now for worse, is the lifeblood of our economy. It undeniably cried out for quick and dirty remedial action before the economy followed the stock market into the abyss. But for some strange reason we don't find it entirely reassuring that the very same people charged with foreseeing and forestalling the credit disaster and who so miserably failed to do so -- Paulson and Bernanke somehow leap to mind -- are entrusted with the formidable task of repairing the damage. Mark it down to our being an incurable malcontent. The damage is huge and mounting. Merrill Lynch's David Rosenberg estimates our credit losses so far weigh in at $600 billion and he reckons that before the crisis breathes its last, that formidable figure will balloon by between $1 trillion and $1.5 trillion. Like a house beginning to sag dangerously after the underpinnings begin to give way, the economy is cracking across a wide front as the collapse of credit takes its inexorable toll. The great consumer spending binge, which for decades has been a mighty economic spur, is over. Consumer confidence plunged to 57.5 this month from 70.3 in September, the biggest drop and the lowest level since the University of Michigan launched its sentiment index back in 1978. More tangible evidence that Jane and John Q. are really feeling the pain and hunkering down in earnest, was the sharp decline in September retail sales to a three-year low. Nothing short of horrendous is the latest bulletins on housing. Starts of single-family homes in September plummeted 12% to still another 26-year nadir. And building permits, a precursor for homebuilding, skidded 8.3% to the lowest level since November 1981. And factory chimneys across a broad swath of industries have started to emit dust instead of smoke. Those chronic optimists, who have become a bit more shy about trilling their joyous notes in recent months, shrug off the downpour of dismal data as "old news". Old, shmold, it hurts just the same, and-you can bank on it-there's plenty more where that came from.UP AND DOWN WALL STREET It Isn't Over
The recession, the credit crunch, the housing collapse and the break market have not run their course. Buffett: great but not infallible.
Sunday, 19 October 2008
MONDAY, OCTOBER 20, 2008
By ALAN ABELSON
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