Cultural Revolutions

Pick Yourself Up

In his Inaugural Address, President Obama declared: “Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America.”  The President was paraphrasing Fred Astaire from the 1936 movie Swingtime.  Fred and Ginger sang Jerome Kern’s song “Pick Yourself Up,” which begins, “Nothing’s impossible I have found, / For when my chin is on the ground, / I pick myself up, dust myself off, / and start all over again.”

Barack Obama should follow that advice when dealing with the so-called financial crisis.  He should let the busted banks go, let the losses fall where they will, and start all over with new banks.  Our big banks are so deeply insolvent—the figure four trillion dollars has been mentioned—that, practically speaking, they cannot be “stabilized” or bailed out.  The sheer scale of the losses is too great; in the fourth quarter of 2008, Citigroup lost $100 million per day.  Bank of America is not doing much better.

We have already spent half of the bailout money, and the banks are in worse shape than they were six months ago.  The Federal Reserve has probably created as much new money as it can.  The federal borrowing necessary to continue bailing out is probably well beyond what the rest of the world is willing to lend us.  Most of the losses come from derivatives, the Doomsday...

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