"Well, that was Brazil -- they've just run out of money"

Paul Krugman takes us on a charming trip down memory lane:

I remember one personal incident: in the fall of 1982, during my year in Washington, I went to the Fed to talk to Ted Truman about Latin debt issues. I had to wait while he finished a phone call; eventually he came out and said, “Well, that was Brazil — they’ve just run out of money.”

Speaking of running out of money, have you guys read this Michael Lewis piece in Vanity Fair on Iceland? Excuse the pun, but it's kind of chilling. Here's a small excerpt detailing the problem, but I strongly suggest you read the entire thing:

Global financial ambition turned out to have a downside. When their three brand-new global-size banks collapsed, last October, Iceland’s 300,000 citizens found that they bore some kind of responsibility for $100 billion of banking losses—which works out to roughly $330,000 for every Icelandic man, woman, and child. On top of that they had tens of billions of dollars in personal losses from their own bizarre private foreign-currency speculations, and even more from the 85 percent collapse in the Icelandic stock market. The exact dollar amount of Iceland’s financial hole was essentially unknowable, as it depended on the value of the generally stable Icelandic krona, which had also crashed and was removed from the market by the Icelandic government. But it was a lot.

Not to be too simplistic in my synopsis of the piece, but Lewis basically blames nutty bankers who believed their own hype. Now, long-time readers know of my antipathy toward investment banking and finance -- to put it simply, I always thought they were overpaid, overbonused, and overrated. As it turns out, their overleveraging of money they didn't have is in large part to blame for the world's economic problems at present.

The funny thing is, until this crisis, no one thought it obscene and perverse that twenty-somethings who spent their college careers puking at frat parties made large sums of money manipulating the flow of money. The argument I would always get from friends and people I know on Wall Street was that, in effect, they were worth it -- that they provided a service which made ungodly amounts of money for their clients, and so a fraction of that ungodly sum, while still obscene to sans culottes such as myself, was actually a bargain. As Hilzoy says, events of the last 12 months have brought that hypothesis into question:

I have been hearing for years and years about how the financial services sector pays such exorbitant wages because the people who work there are so immensely talented that they are cheap at $50 million a year. I never particularly bought that line before. But I never imagined that all those Masters of the Universe would do quite badly. If we had paid them $50 million a year to go far, far away and leave our financial system alone, it would have been a bargain.

Remember, these are the same soul-less people who felt that in the midst of the greatest economic crisis in a near-century, and after having received public money to bail them out, giving ludicrous bonuses to themselves and redecorating their offices to include $1500 trash cans was a wise and prudent thing to do.

Look, I know there are exceptions. I know there are some bankers who are nice, and actually smart, and actually able to put three written sentences together in a coherent and readable paragraph. But I could say the same about Republicans, and frankly, it's not the exceptions to the rule that are going to inform my judgments about these people.