Paul Krugman is very confusing. It's almost like he is trying to fool people who don't understand the difference between <i>savings and loan</i> banks and <i>investment</i> banks ("shadow" banks, in his lingo).<p>The problem in 1930 was that depositors at savings and loan banks all wanted their money back simultaneously. Many people (read: main street) got screwed, leading to the creation of the FDIC. I.e., "the bank doesn't have your money. Sorry."<p>The problem today is that savings and loan banks gave out a bunch of loans to low quality borrowers. They then sold these loans to investment banks while misleading them about the quality (and the IB's just figured it out). "Conventional" banks (the ones PK seems to think are so great) screwed the "shadow" banks (those scary unregulated ones), and now investors are trying to avoid risky investments until things clear up.<p>Both are scary in a "trouble on wall street [financial word] [financial word] bad for the economy [financial word] [financial word]" sense. But beyond that, the situation is rather different.
I'm tired of reading articles like this. If you're going to blame the current crisis on a lack of regulation, please tell me what SPECIFIC regulations you would implement, and explain how they would have helped us avoid the situation we're in.
'Safe banking' is a contradiction in terms. Every time you place money in another organization, their is an amount of risk involved. It only seems like it shouldn't be risky because the Fed guarantees so many banks and loans. This gives the banks more leeway to make risky loans and artificially shifts wealth around in the economy hurting the lower classes.<p>Fortunately, it also means that there is more to go around for startups.
I have to say that these comments (the first 5 at least) are so refreshing. It's great that there are people out there who see through Krugman's propaganda.
BTW, if people are interested in economics, there's now a subreddit for it:<p><a href="http://reddit.com/r/Economics/" rel="nofollow">http://reddit.com/r/Economics/</a><p>Of course it gets some of the same wingnuts that the rest of reddit gets, but there are a few bright guys there.
More propaganda about the great depression.
[here](<a href="http://www.freedomainradio.com/Traffic_Jams/great_depression.mp3" rel="nofollow">http://www.freedomainradio.com/Traffic_Jams/great_depression...</a>) is a lengthy podcast about the great depression and its causes.