3/16/08
Federal
Reserve ponies
up $30 billion
to back deal
for JPMorgan
Chase to buy
failing invest-
ment house
Bear Stearns.
9/7/08
Fed takes
over troubled
housing giants
Fannie Mae and
Freddie Mac.
10/3/08
$700 billion
financial-bailout
bill passes in
Congress and is
signed into law.
11/10/08 Circuit City,
the nation’s
ninth-largest
music retailer,
files for
bankruptcy.
9/16/08
Fed loans
AIG $85 billion
to avoid
bankruptcy
two days
after Lehman
Bros. files for
Chapter 11.
10/6/08
The Dow Jones loses 22.1% of its value, the worst weeklong stock market loss in 75 years.
11/3/08
Wal-Mart cuts
back shelf
space for music
after a 23%
drop in music
sales during the
first four weeks
of the fourth
quarter.
THE FOLLOWING IS A list of terms that will be neither referenced nor explained in the following story: Collateralized debt obligations, mortgage-backed securities, credit default swaps, currency derivatives.
The reason for ignoring what most economists see as the fundamental issues underpinning the financial crisis that dominated the headlines in 2008 is not that I don’t understand them—hell, I’m pretty sure even the hucksters who pushed these complex instruments didn’t really understand them. No, the reason to ignore them is that to the great majority of us, and to almost everyone who cares about, supports, and in the best of circumstances, makes their living from music, the cause is beside the point. It doesn’t
matter how we got into this ditch—we’re here. But what does it all mean, man?
While we’ll happily insulate ourselves from the intimidating vernacular of the meltdown, we probably can’t insulate ourselves from its effects. Of course, hardly anyone agrees what those effects will be, not just on the music industry but on the economy at large. Stan Liebowitz, a professor of economics at the University of Texas, estimates that the U.S. is in for a recession that will last anywhere from six months to three and a half years. “It’s very unlikely to be anything like the Great Depression,” he says. “I don’t think any serious economist is suggesting that.” During the first three years of the Depression, Liebowitz points out, the U.S. economy shrank by 30
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