Simon Johnson has another barely-coherent article in The New Republic about financial crises past, present, and future. Johnson has never been interested in making serious, fact-based arguments, but this article has to be his worst. I think this part amused me the most:
During the heady days of summer 1927, the Fed had done something else that would contribute to the Great Depression: It lowered interest rates.The "heady days of summer 1927"? The U.S. was in a recession in the summer of 1927. I guess if the facts don't fit your conspiracy theory, you just change the facts. He also manages to describe the LTCM crisis without ever even mentioning that a consortium of fourteen Wall Street banks bailed out LTCM to the tune of $3.625 billion. (Johnson conveniently omits any reference to this massive debt-for-equity swap, even though he's previously argued that, with debt-for-equity swaps, "the problem of moral hazard . . . would at once be forgotten.") Instead, he focuses on the moral hazard created by the Fed's decision to cut rates 50bps in the weeks following the LTCM crisis. I kid you not. These two examples are just the tip of the iceberg. TNR's editors should be thoroughly embarrassed.