Hollywood Auction Ends Myth of Zaftig Marilyn: Virginia Postrel
Illustration by Beth Höeckel
We should never again hear anyone declare that Marilyn Monroe was a size 12, a size 14 or any other stand-in for full-figured, zaftig or plump. Fifteen thousand people have now seen dramatic evidence to the contrary. Monroe was, in fact, teeny-tiny.
The 15,000 were the visitors who turned out over eight days to oooh and aaah at the preview exhibit for the June 18 auction of Debbie Reynolds’s extraordinary collection of Hollywood costumes, props and other memorabilia.
The two comments heard most often in the crowded galleries were (to paraphrase), “Wow, they were thin” and “It’s such a shame. These things should be in a museum.”
The two remarks are in fact related. The former demonstrates the truth of the latter.
When the auctioneer’s final hammer came down at 1:20 in the morning, the world lost a treasure. The collection Reynolds assembled over 40 years will now be fragmented and dispersed. “It was a melancholy day for Los Angeles and the rest of the country,” wrote Christian Esquevin on his Silver Screen Modiste blog, expressing a common sentiment. “We will never see the likes of this collection again.”
The movie business has never particularly valued its historical artifacts. Hollywood, notes director John Landis, treats costumes and props as “industrial waste,” to be recycled or discarded but not displayed or preserved. It also keeps an embarrassed distance from the enthusiasts who treasure such relics. Unlike, say, science fiction, the mainstream movie industry doesn’t embrace cult followings. And Los Angeles is notorious for its paucity of institution-building philanthropists.
A Failed Museum
Despite decades of effort, Reynolds never managed to find funding for the Hollywood motion-picture history museum she envisioned. The collapse of her most recent attempt, a project in Pigeon Forge, Tennessee, near Dolly Parton’s Dollywood, precipitated the auction. Reynolds has debts to pay.
From a strictly financial point of view, the collection was undoubtedly worth more in pieces than together -- $22.8 million for the 587 lots sold over the weekend, with a second auction planned for December. My cache of 1930s Fortune magazines would similarly sell for more if I sliced them up and sold the ads and covers separately on EBay.
But as a historical record, a costume collection, like a vintage magazine, is more than the sum of its parts. You learn more from considering the group as a whole.
Take the question of Marilyn Monroe’s size.
That White Dress
The auction’s top-ticket item was Monroe’s famous white halter dress from “The Seven Year Itch,” the one that billowed up as the subway passed. It sold for almost $5.66 million (including the buyer’s premium) to an unknown phone bidder. Sharing a rotating mirrored platform with Hedy Lamarr’s peacock gown from “Samson and Delilah” and Kim Novak’s rhinestone- fringed show dress from “Jeanne Eagels,” Monroe’s costume was displayed on a mannequin that had been carved down from a standard size 2 to accommodate the tiny waist. Even then, the zipper could not entirely close.
But that’s just one dress. Perhaps the star was having a skinny day. To check, you could look across the room and see that Monroe’s red-sequined show dress from “Gentlemen Prefer Blondes” was at least as petite, as were the saloon costume from “River of No Return” and the tropical “Heat Wave” outfit from “There’s No Business Like Show Business.”
Half a Person
In fact, the average waist measurement of the four Monroe dresses was a mere 22 inches, according to Lisa Urban, the Hollywood consultant who dressed the mannequins and took measurements for me. Even Monroe’s bust was a modest 34 inches.
That’s not an anecdote. That’s data.
The other actresses’ costumes provided further context. “It’s like half a person,” marveled a visitor at the sight of Claudette Colbert’s gold-lame “Cleopatra” gown (waist 18 inches). “That waist is the size of my thigh,” said a tall, slim man, looking at Carole Lombard’s dress from “No Man of Her Own” (a slight exaggeration -- it was 21 inches). Approaching Katharine Hepburn’s “Mary of Scotland” costumes, a plump woman declared with a mixture of envy and disgust, “Another skinny one.”
The pattern she noticed was real. At my request, Urban took waist measurements on garments worn by 16 different stars, from Mary Pickford in 1929 (20 inches) to Barbra Streisand in 1969 (24 inches). The thickest waist she found was Mae West’s 26 inches in “Myra Breckinridge,” when the actress was 77 years old.
Waist sizes are easy for the general public to notice and understand. Trained eyes find other patterns that can only emerge when costumes are examined together, rather than treated as individual icons based on who wore them.
Variety Versus Trends
Historians can compare the construction and cut of the “Mutiny on the Bounty” uniforms from 1935 with those from the 1962 remake, for instance, or analyze how Elizabethan court dress was imagined for “Mary of Scotland” or “The Private Lives of Elizabeth and Essex” in the late 1930s, versus “Young Bess” or “The Virgin Queen” from the mid-1950s.
To understand the past, you need a large sample. Only then can you separate idiosyncratic variation from broad trends. With more costume examples, notes Kevin Jones, curator of the museum collections at the Fashion Institute of Design and Merchandising in Los Angeles, you can “get a complete picture of the overall look and feel of a particular production and the specific style of an individual designer.”
One of the strengths of Reynolds’s collection was that she assembled multiple costumes from the same movie -- 12 lots from “Desiree,” for instance, not just Marlon Brando’s coronation robes as Napoleon.
The Entire Cast
She saved not only Audrey Hepburn’s iconic Ascot costume from “My Fair Lady” but also Rex Harrison’s accompanying Henry Higgins suit; not just Gene Kelly’s sailor uniform from “Anchors Aweigh” but also Frank Sinatra’s; not just Norma Shearer’s embroidered Juliet gown but two of Leslie Howard’s Romeo doublets and pants plus the costumes for Lady Capulet, Paris, two female extras and a Montague pole bearer. The auction broke apart such groupings, likely forever.
It also complicated preparations for a landmark costume exhibition. In October 2012, the Victoria & Albert Museum in London will mount the largest motion-picture costume display ever, with costumes representing a century of movies, borrowed from at least 13 institutions and private collections.
Vibrant Art Form
The show is being curated by Deborah Nadoolman Landis (John’s wife), a costume historian and Oscar-nominated costume designer who directs the David C. Copley Center for the Study of Costume Design at the UCLA School of Theater, Film and Television. Its goal, she explained, is to show costume design “as a vibrant modern art form” and “a key component of cinema storytelling.”
Reynolds had enthusiastically pledged whatever costumes from her collection were needed. “She gave me all of her inventory books and said, ‘Look through them. I’ve been trying to do this for years. Please pick whatever you want, and I would love to share these with the world,’” says Landis.
Financial reverses spoiled those generous plans, leaving Landis to hope that anonymous bidders will step forward to volunteer their new prizes for the exhibit. She attended the auction in hopes of identifying these buyers, and the back page of the auction catalog carried the V&A’s plea to borrow eight iconic costumes.
Eccentric and Valuable
Yet even as scholars and fans mourn the collection’s breakup, dreaming of the museum that might have been, they admit the importance of private collectors. These enthusiasts may not all preserve artifacts in museum-quality condition, keeping costumes unaltered and mostly in the dark. But without the sometimes-eccentric people who buy at auctions out of their own passion to own a piece of movie history, no one would have saved these objects in the first place.
“Thank God for them,” says Deborah Landis. “Thank God for Debbie. We would have nothing. It would have been rags. That was the old way. We used everything until it fell off the hanger. That was the tradition in Hollywood.”
Free-Ranging Market Would Save Wolves, Ranchers
Free-Ranging Market Would Save Wolves, Ranchers: Brendan Borrell
Illustration by Alexandra Falagara
Get your rifles ready: Wolf season opens at the end of August, and for as little as $11.50 you’ve got a better chance than ever of bagging this toothy predator.
In July, Montana doubled its kill quota to 220, and Idaho, well, it has declined to set a quota. Wyoming plans to treat wolves as predators in most of the state, allowing them to be killed on sight. If all goes according to plan, the Rocky Mountain wolf population will be knocked down 60 percent from its peak of 1,733 in 2009.
This is obviously a perfectly sound strategy for preserving an iconic American species, which taxpayers have spent hundreds of millions of dollars breeding and feeding. No, not wolves, but public-lands ranchers, whose livestock graze on federal property and who are increasingly concerned about attacks by free-ranging wolf packs.
During this 15-year saga over wolves in the West, which pits conservationists against cowboys, it was easy to miss that the most outspoken cattlemen were not simply asking to guard their private property from deadly intruders. They were defending their right to pay rock-bottom prices to let their cattle graze unchaperoned on 162 million acres of federal land. Conservationists, trying to protect the wolf, were forced to claim these open spaces, vilifying ranchers and hunters and tying up federal regulators in a two-year lawsuit that was ultimately circumvented by Congress.
Fostering Conflict
Living with predators is never easy, but federal grazing policies seem designed to foster conflict rather than cooperation. The future of both wolves and ranchers depends, in part, on reforming our archaic and noncompetitive system through a shift to transferrable federal grazing permits sold on a regulated market.
Increased fees could offset government land management costs, improve environmental monitoring and enforcement, and compensate ranchers when wolves and other predators kill livestock. Environmental groups should be allowed to purchase and retire federal grazing permits in choice wolf habitat. The hunts should also continue, but with limits.
Wolves once roamed throughout the United States, but their presence was never welcome among men and women trying to make a living off the land. In the late 19th century, settlers and government workers devastated Western wolf populations using poison-laced animal carcasses inside and outside their stronghold in Yellowstone National Park. Animals that survived still faced shrinking forest habitat and a decline in their prey species, such as bison and caribou. In 1973, the northern Rocky Mountain wolf became one of the first animals listed under the new Endangered Species Act, but the move only provided the bare minimum of protection and little hope for recovery.
That’s due to the complicated history of public grazing, which also dates back to the late 19th century, when the federal government encouraged western expansion into fertile valleys suited to agriculture. Unclaimed tracts in the uplands became a tragedy of the commons as shepherds and cattlemen competed for space, their livestock trampling healthy stream beds and turning grassy meadows into dustbowls. Range rights were enforced through coercion and violence.
The Taylor Grazing Act of 1934 reduced overgrazing by granting ranchers renewable leases to specific allotments, which allowed them to build fences and encouraged them to take care of the public land.
Today, ranchers have 26,000 permits to graze millions of livestock on pasture managed by the Bureau of Land Management and the Forest Service. They pay $1.35 per head of cattle per month -- a price set by cattle prices, livestock production costs and, ostensibly, private grazing lease rates. But since 1980 that amount has decreased 40 percent to its statutory minimum, and it is typically one-10th of grazing fees on private property and state lands.
Taxpayers Foot Bill
The U.S. spends about $135 million per year managing public-lands grazing, according to the Government Accountability Office, but collects only $21 million in fees. Taxpayers also foot the bill for the Agriculture Department’s predator control program, whose hunters killed 81,684 coyotes and 478 wolves in 2009.
These subsidies might be acceptable if the federal government adequately managed public lands for both food security and environmental sustainability. But many allotments have more cattle than they can support, and land managers rarely hold ranchers accountable when they violate their contracts or damage public lands. Permits have been revoked in just a handful of extreme cases after bankruptcies and charges of animal abuse. It’s a plum deal for these lucky ranchers, who drop their calves and cows off at the beginning of summer and pick them up a hundred pounds fatter in the fall.
In 1995, the range wars began anew. That’s when Canadian wolves were reintroduced to Yellowstone to bring the elk-heavy ecosystem back into balance. Other wolves started moving into northern Montana and Idaho on their own. As their numbers swelled, they were killing a few hundred sheep and cattle every year.
Ranchers have always had the right to shoot wolves caught in the act of attacking livestock, but they wanted to be able to shoot any wolf on sight and to enlist sport hunters for their cause. In 2011, they got their wish. Congress -- at the urging of the Public Lands Council and the National Cattlemen’s Beef Association -- took the unprecedented step of booting Rocky Mountain wolves from the endangered species list.
Idaho and Montana plan to use hunting to keep wolf populations hovering at just above the threshold that would invite federal scrutiny: a couple of hundred animals each. Wyoming has agreed to treat its 340 or so wolves as predators in all but the northwest corner of the state.
Remarkably, legislators from these states are also seeking, through the 2012 Interior Department appropriations bill, to weaken environmental oversight of grazing permits, ban judicial review of wolf protection in Wyoming and the Midwest, and restrict legal challenges to grazing management. These moves would only lead to more acrimony in the West and, inevitably, more money wasted in the courtroom.
A Market Approach
Reducing wildlife conflicts through a market approach is not a new idea. In a few cases, environmental groups have paid ranchers to voluntarily retire federal permits, and the conservation group Defenders of Wildlife began a program -- now run by the federal government -- to compensate ranchers for confirmed livestock kills. For state land trusts, open permit auctions are obligatory because the law requires them to reap the highest profits to support schools.
Congress should make this happen on a wider scale, empowering land managers to fully appraise permits using the latest environmental and livestock science and by allowing ranchers to sell them at market rates. The Endangered Species Act may be our best tool for keeping wolves from going extinct, but a fair market for grazing could help find the right balance when wolves roam free.
CBO Outlook Is Partly Cloudy With Chance of Storms
CBO Outlook Is Partly Cloudy With Chance of Storms: The Ticker
The Congressional Budget Office this morning updated its projections for the U.S. budget deficit, unemployment and economic growth. It's a lot like the weather: Partly cloudy, with a chance of storms ahead. For the deficit, the CBO now estimates the red ink will total $1.3 trillion for the fiscal year ending Sept. 30, down slightly from a previous projection of $1.4 trillion.
A little better, but even so, 2011 would be the third consecutive year of deficits above the trillion-dollar mark. At 8.5 percent of GDP, the deficit would be the third-largest since 1946.
For fiscal 2012, the CBO projects a deficit of $973 billion, down from its previous forecast of $1.1 trillion.
It expects joblessness to fall to 8.9 percent in this year's fourth quarter, and to 8.5 percent by the end of 2012. But the CBO sees unemployment remaining above 8% until 2014.
The budget office updated its July forecast to reflect the policy changes enacted in the Budget Control Act, aka the debt-ceiling deal. The new outlook, however, does not reflect other developments since early July, including this month's plunging stock markets and the weakness in some economic indicators.
The CBO said it would have tempered its near-term growth forecast if it took all that into account. With that caveat, CBO projects inflation-adjusted GDP will be a still sluggish 2.3 percent this year and 2.7 percent in 2012. That forecast reflects CBO’s expectation of continued growth in business investment, modest consumer spending increases, gains in net exports (exports minus imports) and the beginning of a recovery in new-home construction.
The budget agency warned of larger deficits and greater debt if Congress extends the Bush tax cuts, indexes the alternative minimum tax for inflation, and prevents cuts to Medicare payments to physicians -- each a policy under discussion on Capitol Hill. If all that happens, annual deficits from 2012 through 2021 would average 4.3 percent of GDP, compared with 1.8 percent in CBO’s baseline projections.
Berk: Kill Business Profit Tax; Dock Investors Instead
Berk: Kill Business Profit Tax; Dock Investors Instead
Illustration by Ryan Thacker
The corporate income tax, part of the U.S. tax code since 1909, is a failure on all counts. It isn’t raising much money. It isn’t creating socially desirable incentives, and it isn’t immune from manipulation. We should get rid of it in favor of more efficient levies on capital.
There are two commonly held myths about corporate taxes. First, that they bring in a lot of money. They don’t. Last year, only 8.9 percent of government revenue came from such sources. Second, that companies pay the tax. They don’t; only people pay taxes. The corporate tax is extracted from persons associated with a business: investors, employees and customers. Government revenue from these people has been dropping steadily since the peak of almost 30 percent in the 1950s.
One reason why the corporate contribution is low is the tax break for debt. Companies’ payments to debt holders are deductible, while dividends for equity holders aren’t. This imbalance was written into law a century ago, when corporate-tax rates were so low that the disparity didn’t seem to matter. As those levies have climbed, corporations have become eager to take on leverage and thus lower their payments to the Internal Revenue Service.
We witnessed the consequences of this policy in 2008. Corporations, especially banks, opted to issue too much debt, ultimately imposing huge costs on society. One might argue that the leverage subsidy could be better eliminated by simply removing the exemption for debt payments. But that solution is unlikely to succeed, given corporations’ immense lobbying power in Washington.
Creating Loopholes
This brings up a second reason to eliminate the tax. For individuals acting alone, it is effectively impossible to bend the tax code to our will. We can’t afford to hire lobbyists to argue for tailored exemptions for us. We aren’t likely to channel campaign contributions to politicians who can create loopholes just for us, or to ask top accounting firms to reinterpret the tax code to our advantage.
Such ploys are so expensive that it’s cheaper to pay what is due. But if we were taxed as a group, the equation would change. Then we could share tax avoidance costs. If the group were large enough, it would become beneficial for us to engage in tax avoidance.
From a tax perspective, a corporation is a large collection of individuals sharing the costs of avoidance. General Electric Co. (GE), for example, posted $14.2 billion in profits last year but reported paying only $1.1 billion in taxes, an average rate of just 7.4 percent. Corporations strive mightily to pay much less than the statutory 35 percent tax rate on their profits -- a socially wasteful activity.
Meanwhile, the corporate tax’s mischief keeps increasing. Because the levy distorts corporate incentives, it imposes a significant indirect burden on individuals. Workers bear large costs because, by subsidizing leverage, more firms go bankrupt, thereby undermining job security. The rest of us are forced to pay when these over-leveraged firms are deemed too big to fail and must be funded by large government bailouts.
Most importantly, our political process is compromised by the tax-avoidance strategies that corporations adopt. It is hard to understand why we, as a society, are prepared to incur these additional costs for a tax that raises less than 9 percent of government revenue. Surely we are better off eliminating the tax altogether and replacing it with a direct one on individuals.
Taxing Dividends
The obvious alternative would be additional taxes on investment income. Dividends could be taxed at regular rates for individuals, rather than the current 15 percent, which is low by historical standards. The capital-gains rate could be increased, too, from its current maximum of 15 percent on long- term profits.
Greater reliance on investor taxes would be simpler, more equitable, more efficient and more easily enforced. These changes could be implemented without adding to the true load that investors already shoulder. If investors are currently paying most of the corporate tax anyway, increased investment taxes merely offset what was previously paid as corporate taxes.
For society as a whole, efficiency gains would arise as corporations shake free of perverse incentives to spend time and money on tax avoidance. Managerial talent could be redeployed more productively. GE’s shareholders would no longer need to finance the world’s best tax-law firm. Businesses could concentrate on product innovation and profit expansion, creating more lasting value.
Self-Employment Should Play a Bigger Role in Jobs Programs
Self-Employment Should Play a Bigger Role in Jobs Programs: View
Illustration by Bloomberg View
Cammie Allie and Ann Costlow are small-scale entrepreneurs who aren’t trying to start the next Microsoft. Yet both have battled back from unemployment to create successful businesses, with the sort of government support that could help thousands of other jobless people, too.
Allie manages apartment buildings in Portland, Oregon; Costlow owns four creperies in Maryland. To get started, each drew on business coaching and income support from an unusual state-funded jobless initiative. These self-employment assistance programs provide 26 weeks of income support, typically about $10,000. Participants try to start enterprises, rather than being required to look full time for traditional jobs.
Founding a business isn’t for everyone. Hours are long, initial earnings puny, and the failure rate high even in boom times. A weak economy makes everything harder.
For some displaced workers, however, self-employment may be their best hope. Entrepreneurial aid to the jobless is typically aimed at older, educated workers who lost good jobs in battered industries. With the national unemployment rate above 9 percent, such candidates face slim odds of finding appropriate work through a standard job hunt.
In Oregon, people opting for self-employment get business pointers as well as detailed reviews of their startup plans. Examiners look for clear ideas about pricing, supplies, customers and competition. Only candidates judged to have at least a moderate chance of success can proceed.
Oregon’s Successes
Oregon recently surveyed 369 people who have participated in its program since 2000. Seventy percent had started a business; nearly half of those were hiring workers. The small survey’s responses might be skewed toward recipients who thrived. Even so, Oregon’s successful entrepreneurs each created an average of 2.63 additional jobs.
In New Jersey, about 600 jobless people a year try self- employment. Data on success rates is fragmentary, but state officials say participants have started businesses in at least 33 fields, including computer services and catering. When such ventures thrive, founders don’t just earn income -- they keep hiring, becoming job multipliers.
Self-employment aid closely matches the cost of regular unemployment benefits, which can run $400 a person per week. Britain, France and Sweden have operated similar entrepreneurial assistance programs since the 1980s, with good results. In the U.S., though, only about a dozen states have followed suit, and most programs are tiny.
Bureaucracy is partly to blame. Current state and federal rules don’t allow unemployed workers to pursue self-employment aid right away; instead they must qualify for regular jobless benefits first, which takes weeks. States also worry that some startup dreams might fizzle quickly, wasting taxpayer money.
Living With Risks
Making the entrepreneur’s path risk-free is impossible. Still, that shouldn’t stymie such aid. Three of the biggest states -- California, Texas and Florida -- are home to 30 percent of America’s unemployed. These states don’t currently offer entrepreneurial assistance to the jobless; setting up such programs would be a big help.
Two other changes could help make entrepreneurship a likelier path back to work. First, states should tell the newly jobless about the self-employment option right away, rather than making them wait a month or two before becoming eligible. And second, minor income from a side business -- capped at a reasonable level of, say, $750 a month -- shouldn’t be automatically counted against jobless benefits. In some cases this year’s hobby can be built into next year’s business.
When 4.7 people are out of work for every job opening, unemployed Americans deserve better odds of becoming their own bosses.
Tuesday, August 23, 2011
The Federal Reserve Saves The Stock Market?
The Federal Reserve has saved the stock market! Well, at least for a day. That was one heck of a "dead cat bounce" that we saw on Tuesday. Normally, after the kind of dramatic decline that we saw on Monday there is some sort of a rebound, but on Tuesday the market did not begin to soar until the Federal Reserve pledged to leave interest rates near zero until mid-2013. Once the Fed made their announcement, the market went haywire. At one point the Dow was down more than 200 points, but by the end of the day it was up 430 points. It was a desperate move for the Federal Reserve to pledge not to raise interest rates for the next two years, and it has stabilized financial markets for the moment. But what is the Fed going to do to save the stock market when it starts crashing next week or next month? The underlying financial fundamentals continue to get worse and worse. Europe is a mess, Japan is a mess and the United States is a mess. The Federal Reserve can try to keep all of the balls in the air for as long as possible, but at some point the juggling act is going to end and the house of cards is going to come crashing down.
This move may calm nerves for a day or two, but there is still a tremendous amount of fear out there at the moment. Many investors are pouring money into "safe havens" right now. Huge amounts of cash are being poured into U.S. Treasuries and the price of gold is absolutely soaring. The price of gold is up about $220 in just the last 30 days alone.
So how high could the price of gold go in the coming months? Well, analysts at JP Morgan are forecasting that the price of gold could hit $2,500 by the end of this year.
Yes, that is how wild things are becoming. The Federal Reserve is painting itself into a corner. Never before has the Fed pledged to leave interest rates near zero for the next two years. The following is an excerpt from the statement that the Fed released earlier today....
To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
Needless to say, the rest of the world is not pleased by this nonsense from the Fed. Yes, the Fed has stabilized financial markets for the moment, but a lot of ill will is being created with the rest of the globe. The following is what Bruce Krasting had to say about how the rest of the world is going to react to this latest Fed move....
Brazil, Argentina, Korea, Indonesia are going to scream bloody murder over perpetual ZIRP. Russia is likely to get downright ugly with their rhetoric. I wouldn’t be surprised if they took this opportunity to vote with their feet and just abandon the dollar as a reserve holding. China will also make noise. They will make more calls for a new international currency to replace the dollar. The Central bankers in Japan and Switzerland are puking in the trashcan over this. Bernanke is exporting US deflation to them. Shame on the Fed for pursuing Beggar my neighbor policies. They deserve all the global criticism they are about to get.
The Federal Reserve is using up all of the ammunition it has available and the game has barely even begun.
Things are going to get a lot worse. The U.S national debt continues to pile up at lightning speed. The debt ceiling deal essentially does nothing to fix our debt problems. Thousands of businesses and millions of jobs continue to leave the United States. As a nation, we are constantly becoming poorer and we are constantly getting into more debt.
Meanwhile, Europe is on the verge of a financial meltdown and Japan has a "zombie economy" at this point.
Many fear that we could be on the verge of another major global recession. The following is how a recent Der Spiegel article described the current global financial situation....
Many economists have been pointing out that last week's panic resembled the fear that swept financial markets after the collapse of US investment bank Lehman Brothers in September 2008.
Then as now, banks stopped lending each money. Then as now, banks' cash deposits at the central bank doubled within days. The European Central Bank reacted by assuring banks of unlimited liquidity in the coming months. It was an emergency measure that led to short-term relief but sparked anxious questions among bankers and stock market players. How long can the central bank keep up its market-soothing liquidity operations before it finally loses its credibility, the most important asset of a central bank? Is the financial crisis about to escalate?
In the old days, the U.S. and Europe could just borrow gigantic stacks of cash in order to solve any problems. But now things are dramatically changing.
China's official news agency recently stated that the U.S. needs to understand that things are different now....
"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone"
Not that the U.S. government and the Federal Reserve are going to suddenly give up their old habits. The U.S. government is addicted to debt and the Fed is addicted to printing money. When push comes to shove, they are going to resort to their favorite tricks.
But at some point the rest of the world is not going to play along anymore. When that moment arrives, it is going to be very interesting to see what happens.
Meanwhile, the U.S. economy continues to slowly unravel, and people in this country are getting very angry. Millions of Americans families are barely scraping by right now. Most Americans just want someone to "fix" things, but unfortunately there are no easy "fixes" to our financial problems.
As our economic problems grow even worse, frustration inside the United States is going to continue to escalate. A brand new Rasmussen survey found that only 17 percent of Americans now believe that the U.S. government has the consent of the governed.
That was a brand new all-time low.
Faith in the major institutions of our society is already dangerously low and the economy is not even that bad yet.
As horrible as things are now, the truth is that this is rip-roaring prosperity compared to what is coming.
In the months and years ahead, America is going to be greatly tested. As the recent London riots have shown, things can spiral out of control very quickly.
When the economy completely collapses will America be able to handle it?
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