"Did the world almost come to an end Sept. 18th?
I've had so many of you write me and ask me what I think of this blog post. The main claim is taken from Paul Kanjorski:
If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.
The second paragraph is very much overstated (and I wonder about the exact numbers in the first paragraph). My personal guess -- and guess is the right word -- is that if nothing had been done on this day, a disaster would have resulted, though not on the scale postulated here. In my view there would have been an immediate bank holiday, partly improvised, plus complete insolvency for some very large financial institutions, followed by rapid nationalization. There would have been a much tougher whack to the commercial paper market than what we saw. Many businesses would have had problems meeting short-term payroll requirements. The downturn in the real sector would have been much steeper than it has been. In short, it would have been very bad but not the end of the world economy or democratic capitalism.
Posted by Tyler Cowen on February 16, 2009 at 07:21 AM in History | Permalink
Me:I think that the Aleph Blog has a good point about what occurred:
http://alephblog.com/2009/02/15/the-story-not-told/
I'll simply repeat me view that I posted there: There was definitely a threat to pull out of money market funds. The threat was to test the strength of the government's guarantees in this crisis. When the government essentially guaranteed money market funds, the threat ended.
Posted by: Don the libertarian Democrat at Feb 16, 2009 11:35:30 AM
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