A brief comment on the economy

Most of the press is acting as if the real danger we face in the economy is the danger of a recession. I think this misses the real risk we are facing right now. If the various actions taken by the Fed don't work (and there's real doubt they will) and if massive further actions aren't adopted, there is a real risk that one or two major Wall Street banks might actually fail -- say, for instance, Citibank and Merrill Lynch. If that should happen, the FDIC and SIPC would be overwhelmed, and there would probably be a collapse of the entire banking system. You wouldn't be able to withdraw funds from your bank; you wouldn't be able to cash checks; you wouldn't be able to sell stocks and bonds; your credit cards would be worthless -- the entire system would be frozen, not unlike the bank holiday in 1933. That's the real danger we face right now, and I don't have a great deal of confidence that the Bush Administration will take any positive steps to prevent it. Their ideology tells them to keep government from messing with the market, even when the market fails.

This probably won't happen, but I think this is far more on the minds of the Fed than preventing a recession. Recession would be an minor problem compared to this scenario.

Just a personal note: I haven't decided to cash out all my stock and bond holdings and my bank accounts, buy gold, and store it under the mattress yet, but I have thought about it.