It was an evening in the mid-1970s and I was riding with my dad in his pickup. The AM radio was tuned to 1180 WHAM and Ed Hasbrouck’s talk show was on. The topic was the American economy, which at that moment wasn’t doing very well.
Ed was recalling the bank failures of the Great Depression and told his listeners, “I don’t know about you, but I’m keeping my money in my hot little hand.” I was just getting to an age when I was aware of things like the economy and I wasn’t sure to what to make of it, but I remember Ed saying over and over, “I’m keeping my money in my hot little hand.”
The next day, there was a bit of a run on local banks and then a discussion of whether Mr. Hasbrouck had been irresponsible to say what he had said or whether the First Amendment trumped all. The panic passed after a few days or a week, people – or at least many of them – put their money back in the bank and life returned to normal.
I spoke to my dad on the phone the other night and he didn’t remember the incident. He and my mom are expecting their first great-grandchild and they both agreed that when it comes to the American economy, they’re glad they’re senior citizens and will not have to deal with the cost of the $700 billion bailout the administration is asking taxpayers for. Or the billion-dollars-a-week tab for the Iraq war. “But what about that great-grandchild?” Dad asked. “Or that kid’s grandchild? They’ll still be paying this off.”
He’s got a point. How big is $700 billion? If I give you a dollar a day, in about three years, you’ll have a thousand dollars. In three thousand years, you’ll have a million dollars. Let’s look at that in the past. If you started collecting a dollar a day a millennium before the birth of Jesus of Nazareth, you would now have a bit more than a million dollars.
Million is too paltry a frame for this. Let’s say you started collecting a thousand dollars a day, starting a thousand years before the birth of Jesus. You’d have a bit more than a billion dollars today. But that’s just a billion. To get to Treasury Secretary Henry Paulson’s number you’d have to collect $700,000 dollars a day, every day since 1000 BCE and you’d be just arriving at $700 billion today. In 1000 BCE, the Bronze Age was ending and Iron Age was beginning. David had just become king of Israel.
So that’s $700,000 a day, every day through the rise and fall of the Roman Empire, the Dark Ages, the Renaissance, the Age of Exploration, the Enlightenment, the American Revolution, the French Revolution, Manifest Destiny, two World Wars and – oh yes, the Great Depression. Seven hundred thousand dollars a day. Every day. No weekends. No holidays. For three thousand years.
This is all happening because Mr. Paulson allowed Wall Street investment banks to grow “too big to fail.” Responsible voices have been warning him about a liquidity crisis for 18 months. At first, he refused to admit there was a problem, then (up until about a week ago) said he acknowledged the problem, but said it was “contained.” Suddenly, Mr. Paulson wants you, me and the U.S. Congress to give him a blank check and dictatorial authority.
This week Sen. Bernie Sanders (I-VT) said, “If a company is too big to fail, it is too big to exist.” He’s got a point, although some people will say that sounds like socialism. (It is. Bernie’s a socialist.) As Patrick Henry might have said, “If this be socialism, make the most of it.” (Or make sure there’s something in it for you.)
Plenty of economists are saying $700 billion won’t be enough to stanch the bleeding. The fact that housing prices continue to drop coupled with the idiotic investment devices that allowed bundles of mortgages to be traded like stocks, means we have yet to glimpse the far side of this abyss.
John McCain, who said last week that the American economy’s fundamentals are strong, now says he’s suspending his campaign and heading back to Washington. George Bush went on tee vee last night and did nothing more than expose his impotence, which might explain Mr. McCain’s trip to DC. If you don’t want people to notice how clueless you are, go stand in a crowd of other clueless people.
Maybe Ed Hasbrouck’s advice was best: get your money out of the bank and keep it in your “hot little hand.” It’s not a patriotic or communitarian idea, but there doesn’t seem to be anyone in Washington looking out for your interests, so maybe you’d better do it yourself.
See if you can get that in euros.
© Mark Floegel, 2008
“My Hot Little Hand”
It was an evening in the mid-1970s and I was riding with my dad in his pickup. The AM radio was tuned to 1180 WHAM and Ed Hasbrouck’s talk show was on. The topic was the American economy, which at that moment wasn’t doing very well.
Ed was recalling the bank failures of the Great Depression and told his listeners, “I don’t know about you, but I’m keeping my money in my hot little hand.” I was just getting to an age when I was aware of things like the economy and I wasn’t sure to what to make of it, but I remember Ed saying over and over, “I’m keeping my money in my hot little hand.”
The next day, there was a bit of a run on local banks and then a discussion of whether Mr. Hasbrouck had been irresponsible to say what he had said or whether the First Amendment trumped all. The panic passed after a few days or a week, people – or at least many of them – put their money back in the bank and life returned to normal.
I spoke to my dad on the phone the other night and he didn’t remember the incident. He and my mom are expecting their first great-grandchild and they both agreed that when it comes to the American economy, they’re glad they’re senior citizens and will not have to deal with the cost of the $700 billion bailout the administration is asking taxpayers for. Or the billion-dollars-a-week tab for the Iraq war. “But what about that great-grandchild?” Dad asked. “Or that kid’s grandchild? They’ll still be paying this off.”
He’s got a point. How big is $700 billion? If I give you a dollar a day, in about three years, you’ll have a thousand dollars. In three thousand years, you’ll have a million dollars. Let’s look at that in the past. If you started collecting a dollar a day a millennium before the birth of Jesus of Nazareth, you would now have a bit more than a million dollars.
Million is too paltry a frame for this. Let’s say you started collecting a thousand dollars a day, starting a thousand years before the birth of Jesus. You’d have a bit more than a billion dollars today. But that’s just a billion. To get to Treasury Secretary Henry Paulson’s number you’d have to collect $700,000 dollars a day, every day since 1000 BCE and you’d be just arriving at $700 billion today. In 1000 BCE, the Bronze Age was ending and Iron Age was beginning. David had just become king of Israel.
So that’s $700,000 a day, every day through the rise and fall of the Roman Empire, the Dark Ages, the Renaissance, the Age of Exploration, the Enlightenment, the American Revolution, the French Revolution, Manifest Destiny, two World Wars and – oh yes, the Great Depression. Seven hundred thousand dollars a day. Every day. No weekends. No holidays. For three thousand years.
This is all happening because Mr. Paulson allowed Wall Street investment banks to grow “too big to fail.” Responsible voices have been warning him about a liquidity crisis for 18 months. At first, he refused to admit there was a problem, then (up until about a week ago) said he acknowledged the problem, but said it was “contained.” Suddenly, Mr. Paulson wants you, me and the U.S. Congress to give him a blank check and dictatorial authority.
This week Sen. Bernie Sanders (I-VT) said, “If a company is too big to fail, it is too big to exist.” He’s got a point, although some people will say that sounds like socialism. (It is. Bernie’s a socialist.) As Patrick Henry might have said, “If this be socialism, make the most of it.” (Or make sure there’s something in it for you.)
Plenty of economists are saying $700 billion won’t be enough to stanch the bleeding. The fact that housing prices continue to drop coupled with the idiotic investment devices that allowed bundles of mortgages to be traded like stocks, means we have yet to glimpse the far side of this abyss.
John McCain, who said last week that the American economy’s fundamentals are strong, now says he’s suspending his campaign and heading back to Washington. George Bush went on tee vee last night and did nothing more than expose his impotence, which might explain Mr. McCain’s trip to DC. If you don’t want people to notice how clueless you are, go stand in a crowd of other clueless people.
Maybe Ed Hasbrouck’s advice was best: get your money out of the bank and keep it in your “hot little hand.” It’s not a patriotic or communitarian idea, but there doesn’t seem to be anyone in Washington looking out for your interests, so maybe you’d better do it yourself.
See if you can get that in euros.
© Mark Floegel, 2008