Krugman: This is the End, Beautiful Friend, This is The End My Only Friend, The End

Paul Krugman has put out a NY Times article that tells us that the Bush admin (and the other world governments) have one last chance to "get it right". The financial crisis has been allowed to slosh around and grow and morph and now the markets around the world have teetered over the edge and there is only one last chance to do something real to fix it...

Last month, when the U.S. Treasury Department allowed Lehman Brothers to fail, I wrote that Henry Paulson, the Treasury secretary, was playing financial Russian roulette. Sure enough, there was a bullet in that chamber: Lehman’s failure caused the world financial crisis, already severe, to get much, much worse.

The consequences of Lehman’s fall were apparent within days, yet key policy players have largely wasted the past four weeks. Now they’ve reached a moment of truth: They’d better do something soon — in fact, they’d better announce a coordinated rescue plan this weekend — or the world economy may well experience its worst slump since the Great Depression.

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The response to this downward spiral on the part of the world’s two great monetary powers — the United States, on one side, and the 15 nations that use the euro, on the other — has been woefully inadequate.

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And the time to act is now. You may think that things can’t get any worse — but they can, and if nothing is done in the next few days, they will.

I sure hope Bush finally "gets it" and that Paulson "gets it". This is like Katrina. I feel like one of those poor urban inner city slum dwellers left on a bridge overpass amid the flood waters, left standing for 5 and 6 days in the blistering heat and the darkness of night with no water, with no message of help coming, with just the wondering of how their world had collapsed and they were left in this helpless state.

Here's something from Krugman's blog which looks at the broader problem...

One thing I’ve been asked is why I’m not writing more about relief for homeowners and other kinds of bottom-up aid to the economy. Probably I should be saying more. But in defense, let me say that there are two kinds of economic problem right now.

The most acute problems involve the run on the financial system. This has to be brought under control if we want to avoid a 1931-style collapse. And things like homeowner workouts quite simply won’t deliver enough relief to bank capital, and certainly not fast enough, to help significantly on that front. So there’s a financial relief imperative, which mainly involves injection of capital and guarantees of liquidity.

Now, on top of that we’ve got the economy’s slide into recession, which will continue even if the high-speed financial crisis is brought under control. What we need there is action on many things: fiscal stimulus, aid to state and local governments, homeowner relief, and more.

So... the next few days will define for us whether we see the reappearance for the Great Depression, something that I thought we were "too smart" to allow to ever happen again. But those "smartest guy in the room" on Wall Street have brought us Back to the Future!

If you don't catch the reference in the title of this post, then watch this...