Simon Johnson, in the May 2009 issue of The Atlantic:

The conventional wisdom among the elite is still that the current slump "cannot be as bad as the Great Depression." This view is wrong. What we face now could, in fact, be worse than the Great Depression -- because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

Peter Schiff:

I think things are going to get very bad.

Nouriel Roubini:

Things are going to be awful for everyday people.

Michael Lewis:

The era that defined Wall Street is finally, officially over.

Rebecca Brock:

People say to me, "Whatever it takes." I tell them, It's going to take everything.

From the archive:

My heart swells in my chest and while I laugh,
I feel fear, smell a faint stench of insanity.

The Quiet Coup

Simon Johnson, in May 2009:

The conventional wisdom among the elite is still that the current slump "cannot be as bad as the Great Depression."

This view is wrong.

Pete Flint, of Trulia:

There was a time when owning a home was a symbol you had made it. Now it's O.K. not to own.

Adam Lyons, a manager at IBM:

I don't think we're ever going to see the prosperity our parents did.

David Streitfeld:

Housing is locked in a downward spiral, industry analysts say, not only because so many people are blocked from the market, but because even those who are solvent are opting out.

The market's persistent weakness runs the risk of feeding on itself. Buyers are staying away despite the lowest interest rates and the highest affordability levels in many years, which in turn prompts others to hesitate.

Decius:

No one wants to try to catch a falling knife.

Streitfeld:

Susan Lindsey, a San Diego software programmer, was once eagerly waiting for the housing market to crash.

With prices now down by a third, however, she is content to stay in her $2,500-a-month rental. She prefers to invest in gold, which she has been buying since 2003.

w1ld:

Got gold?

Chris Walsh:

After jokingly asking "Time to buy gold, huh?", there was a pregnant pause. Then came the response: "Buy ammunition".

New Low in House Prices

Ginia Bellafante:

There used to be a time if you didn't have money to buy something, you just didn't buy it.

Paul Krugman:

In a housing market that is now depressed throughout the economy, mortgage holders and troubled borrowers would both be better off if they were able to renegotiate their loans and avoid foreclosure. But when mortgages have been sliced and diced into pools and then sold off internationally so that no investor holds more than a fraction of any one mortgage, such negotiations are impossible. And because of the financial industry lobbying that prevented mortgages from being covered by personal bankruptcy proceedings, no judge can impose a solution. The phenomenon of securitization, created in the belief that a large-scale housing crash would never happen, has trapped investors and troubled borrowers in a mutually destructive downward spiral.

Matt Taibbi:

If America is now circling the drain, Goldman Sachs has found a way to be that drain.

David Leonhardt:

You can make an argument that the end of the housing crash is near.

But that's not what I found.

Paul Krugman:

Lost decade, anyone?

The Economist's Washington correspondent:

By some measures, America already has a lost decade in its rearview mirror. A couple more would mean a lost generation. Worst of all, it would mean my generation.

Decius:

Man, what a great time to be alive!

Penelope Trunk:

Stop talking about time like you need to save it. You just need to use it better.

Further Down The Spiral

Paul Krugman:

We are now, I fear, in the early stages of a third depression.

It will probably look more like the Long Depression than the much more severe Great Depression.

But the cost -- to the world economy and, above all, to the millions of lives blighted by the absence of jobs -- will nonetheless be immense.

The Economist's Washington correspondent:

I thought I was unlucky graduating into the tech bust.

I had no idea.

Barry Ritholtz:

This current generation is pretty much fucked.

Simon Johnson:

The conventional wisdom among the elite is still that the current slump "cannot be as bad as the Great Depression."

This view is wrong.

Neil Howe:

If you think that things couldn't get any worse, wait till the 2020s.

Anatole Kaletsky:

The battle over bailouts in Europe is only a sideshow compared with the great social conflict that lies ahead all over the world in the next 20 years.

Decius:

Man, what a great time to be alive!

Dan Kildee:

Much of the land will be given back to nature.

People will enjoy living near a forest or meadow.

Decius:

Cutting production means layoffs which will reduce consumption which will reduce orders which means that production will need to be cut which will require more layoffs which will reduce consumption which will reduce orders which means that production will need to be cut which will require more layoffs which will reduce consumption which will reduce orders which means that production will need to be cut which will require more layoffs ...

John Lanchester:

It's becoming traditional at this point to argue that perhaps the financial crisis will be good for us, because it will cause people to rediscover other sources of value. I suspect this is wishful thinking, or thinking about something which is quite a long way away, because it doesn't consider just how angry people are going to get when they realize the extent of the costs we are going to carry for the next few decades.

Judith Warner:

We're all losers now. There's no pleasure to it.

The Onion:

After nearly four months of frank, honest, and open dialogue about the failing economy, a weary US populace announced this week that it is once again ready to be lied to about the current state of the financial system.

The Third Depression

At the mall, an exchange:

Blakey: Okay, listen. At the mall, there is all the stuff you want, but like, can't have, right?

Tara: Yeah, so?

Blakey: Well, I mean that's like totally like being in hell, right?

Tara: Um, I don't know, Blakey, cause, like, all that wanting is, like, what I dream about all week long. I think it helps to want more than I can have, you know what I mean? Cause, like, I love to want.

Blakey: I love to want, too, but like, I love to have, way more.

Tara: Yeah. I know, having is sooo much better than wanting.

Blakey: I know, but like, wanting is like, part of life, right?

Tara: Yeah, and life is about getting, so, it all makes sense. Life is about wanting to have, and then getting, and then having, and then, like, wanting more.

Blakey: Whoa. Tara, that is so true.

Michael Lopp:

We're in a world where you can find anything you want, which is great, except when you realize there's a lot of everything.

Randall Munroe:

What if I want something more?

Sarah Silverman:

You're very free if you don't love money.

OMG BFF LOL

Roger Scruton:

There is truth in the view that hope springs eternal in the human breast, and false hope is no exception.

Katja Grace:

Apparently it's crazy to want our species extinct, but crazy not to want it arbitrarily smaller.

Thom Yorke:

It will be only a matter of time -- months rather than years -- before the music business establishment completely folds. It will be no great loss to the world.

Freeman Dyson:

Essentially you need sunshine and water. That's about all.

Jonathan Franzen:

And then there's your e-mail: shouldn't you be dealing with your e-mail?

Sterling Hayden:

What does a man need -- really need? A few pounds of food each day, heat and shelter, six feet to lie down in -- and some form of working activity that will yield a sense of accomplishment. That's all -- in the material sense.

Rivka Galchen:

I prefer the taciturn company of my things. I love my things. I have a great capacity for love, I think.

Sarah Silverman:

You're very free if you don't love money.

Tony Travers:

London is becoming a First World core surrounded by what seems to be going from a second to a Third World population.

John Rapley:

As states recede and the new medievalism advances, the outside world is destined to move increasingly beyond the control -- and even the understanding -- of the new Rome.

Joel Kotkin:

Britain's welfare state now accounts for nearly one-third of government spending.

John Lanchester:

The average British household owes 160 per cent of its annual income. That makes us, individually and collectively, a lot like the cartoon character who's run off the end of a cliff and hasn't realized it yet.

We in Britain are, to use a technical economic term, screwed.

David Runciman:

Politics in the UK is now comprehensively out of sync.

During the Blair years there was enough money around to paper over the cracks. Not any more. When the money runs out, the cracks start to show.

Neil Howe and William Strauss:

Each generation belongs to one of four types, and these types repeat sequentially in a fixed pattern.

Anatole Kaletsky:

The battle over bailouts in Europe is only a sideshow compared with the great social conflict that lies ahead all over the world in the next 20 years. This will not be a struggle between nations or social classes, but between generations.

Tom Friedman:

For 60 years you could really say being in politics, being a political leader, was, on balance, about giving things away to people. That's what you did most of your time.

I think we're entering an era where being in politics is going to be more than anything else about taking things away from people. It's going to be very, very interesting.

Neil Howe:

If you think that things couldn't get any worse, wait till the 2020s.

The world is entering a demographic transformation of unprecedented dimensions.

Population trends point inexorably toward a more dominant U.S. role in a world that will need us more, not less.

Decius, on his generation:

Our job is to apply our well-earned cynicism and fail to follow the baby boomers off a cliff in their pursuit of some idealistic agenda.

Rory Stewart:

"It's like they're coming in and saying to you, 'I'm going to drive my car off a cliff. Should I or should I not wear a seatbelt?' And you say, 'I don't think you should drive your car off the cliff.' And they say, 'No, no, that bit's already been decided - the question is whether to wear a seatbelt.' And you say, 'Well, you might as well wear a seatbelt.' And then they say, 'We've consulted with policy expert Rory Stewart and he says ...'"

Ginia Bellafante:

There used to be a time if you didn't have money to buy something, you just didn't buy it.

Pascal Bruckner:

A revolution comes when what was taboo becomes mainstream.

Ruth Simon And James R. Hagerty:

23% of all mortgage borrowers in the US are underwater.

David Foster Wallace:

There are these two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, "Morning, boys, how's the water?" And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes, "What the hell is water?"

Steven Pinker:

In every age, taboo questions raise our blood pressure and threaten moral panic. But we cannot be afraid to answer them.

Simon And Hagerty:

Mortgage troubles are not limited to the unemployed. About 588,000 borrowers defaulted on mortgages last year even though they could afford to pay -- more than double the number in 2007, according to a study by Experian and consulting firm Oliver Wyman. "The American consumer has had a long-held taboo against walking away from the home, and this crisis seems to be eroding that," the study said.

John Bird and John Fortune:

They thought that if they had a bigger mortgage they could get a bigger house. They thought if they had a bigger house, they would be happy. It's pathetic. I've got four houses and I'm not happy.

Decius:

I've gotten old enough that I now understand why adults seek to escape reality. Paradoxically, I think I was better at escaping reality when I was younger.

Richard Brody:

On the island where he encounters the Wild Things, Max talks of his desire to do away with the "sadness and loneliness" -- something that has less to do with their needs and desires than with his own -- or, rather, with the screenwriters' notion that so much of experience can be summed up under those two signifiers, and that there's some implicit happiness awaiting those who can suppress them.

John Lanchester:

It's becoming traditional at this point to argue that perhaps the financial crisis will be good for us, because it will cause people to rediscover other sources of value. I suspect this is wishful thinking, or thinking about something which is quite a long way away, because it doesn't consider just how angry people are going to get when they realize the extent of the costs we are going to carry for the next few decades.

The Economist's Washington correspondent:

By some measures, America already has a lost decade in its rearview mirror. A couple more would mean a lost generation. Worst of all, it would mean my generation. I thought I was unlucky graduating into the tech bust. I had no idea.

1 in 4 Borrowers Are Underwater

Late last year, Niall Ferguson wrote:

This hunt for scapegoats is futile. To understand the downfall of Planet Finance, you need to take several steps back and locate this crisis in the long run of financial history. Only then will you see that we have all played a part.

The key point is to appreciate why the quants were so wrong.

This past weekend, Paul Krugman picks up the story:

The central cause of the profession's failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

Unfortunately, his latest essay doesn't offer much new insight on the subject. There's plenty of material in the archive that covers this ground with more interest ... a sampler follows.

John Cochrane:

It is very comforting in times of stress to go back to the fairy tales we heard as children, but it doesn't make them less false.

Paul Graham:

I'm not saying we should stop, but I think we should at least examine which lies we tell and why.

H. L. Mencken:

There is always an easy solution to every human problem -- neat, plausible and wrong.

Freeman Dyson:

By excluding messiness, they excluded the essence of life.

Decius:

The economist's suggestion, that ignorance is bliss, is a perfect example of why accounting is the opposite of art.

Anthony Lane:

The problem is not the ignorance. The problem is the bliss.

John Lanchester:

If I had to name one high-cultural notion that had died in my adult lifetime, it would be the idea that difficulty is artistically desirable.

Compare Decius, in January (below), with Krugman's parable of the Capitol Hill Baby-Sitting Co-op:

Cutting production means layoffs which will reduce consumption which will reduce orders which means that production will need to be cut which will require more layoffs which will reduce consumption which will reduce orders which means that production will need to be cut which will require more layoffs which will reduce consumption which will reduce orders which means that production will need to be cut which will require more layoffs ...

Patricia Princehouse's friend:

It takes half a second for a baby to throw up ... [ Read More (0.2k in body) ]

How Did Economists Get It So Wrong?

Benjamin Friedman:

What is sorely missing from the protracted debate about how to clean up after the latest crisis is any real discussion of what function our financial system is supposed to perform and how well it is doing that job - and, just as important, at what cost.

For years, much of the best young talent in the western world has gone to private financial firms. At the individual level, no one can blame these graduates. But at the level of the aggregate economy, we are wasting one of our most precious resources.

These talented and energetic young citizens could surely be doing something more useful.

Economic decisions are supposed to turn on weighing costs and benefits. It is time for some serious discussion of what our financial system is actually delivering to our economy and what it costs to do that.

Richard Hamming:

If you do not work on an important problem, it's unlikely you'll do important work.

Alan Kay:

If the children are being instructed in the pink plane, can we teach them to think in the blue plane and live in a pink-plane society?

J. Peder Zane:

The notion of an aspirational culture, in which one endeavors to learn what is right, proper and important in order to make something more of himself, is past.

Pico Iyer:

It seems that happiness, like peace or passion, comes most freely when it isn't pursued.

Why Not Do Something Useful?