The sudden collapse of the global banking system that followed the bankruptcy of Lehman - described by Mr King yesterday as probably the worst financial crisis in recorded history - was a separate affliction. Like a heart attack in a patient previously weakened by chemotherapy, it required a different clinical response.
Rather than a heart attack, the global banking collapse could perhaps be described as a bullet in the head, since its proximate cause was a conscious decision by the US Treasury to jeopardise the stability of the world economy in pursuit of an essentially political objective - to show that the Bush Administration was willing to act ruthlessly against at least one big Wall Street investment bank. Until that point, savers and investors around the world had assumed that financial institutions such as Lehman were “too big to fail” and would always be supported by their governments.
By shattering this belief Henry Paulson triggered a run on every important bank in the world and caused the sudden implosion of consumer and business confidence seen in the past two months.
Emphasis added by me.
His analysis is rather suspect. As in, I suspect he is parroting what the financial crooks want us to believe.
Here is his own flaw:
The obvious ways to do this are to slash interest rates and taxes, especially taxes on consumption and on lower income households, who are most likely to spend rather than save any extra money that they are allowed by governments to keep.
To avoid a deep and prolonged depression, policymakers all over the world must be willing to cut interest rates to levels never before imagined - if necessary all the way to zero, as Mr King hinted yesterday - and to increase their budget deficits without any regard to the old rules of fiscal restraint. They must also be willing to let their exchange rates float without worrying about inflation - another controversial policy that Mr King rightly endorsed yesterday.
Luckily, the post-Lehman recession has made this possible by transforming the inflation outlook: oil and commodity prices have halved in just over two months.
Emphasis added by me.
Riiiight: low commodity prices. Until, say, a disaster hits somewhere and those prices spike like all fuck. Let's not forget what happened with rice earlier this year.