During the height of the panic over Wall Street that led to the bailouts, TARP and the rest, I had the good sense to say on several occasions that while the details of the crisis were beyond the grasp of my personal ability to understand economics and finance that "either this was a monumental failure of the capital market system or the greatest hoax since Piltown Man." After all the estimated value of the shadow banking industry and its various instruments was set at a number close to the GDP of the entire planet for a year. And since it was generally agreed that these instruments had little "mark to market" value then one could ipso facto conclude that the crisis was gargantuan. I confess my caveat that it could all be a hoax was more intended to support my notion that the crisis was profound than to offer an actual alternative explanation. However I am too long in the tooth to ever completely discard the possibility that I am being duped. No great insight here of course. Recent political history makes it a droll disclaimer.

There were loose threads to the story of course and third and fourth and fifth explanations that had merit. Today I came across this summary by Mike Whitney: Lehman Died So TARP and AIG Might Live. Whitney asserts:

Lehman was a planned demolition (most likely) concocted by ex-Goldman Sachs CEO Henry Paulson, who wanted to create a financial 9-11 to scare Congress into complying with his demands for $700 billion in emergency funding (TARP) for underwater US banking behemoths. The whole incident reeks of conflict of interest, corruption, and blackmail.

A few weeks ago Paul Krugman wrote an eight page op-ed in the NYT in which he tried to describe an explanation for why economists had so totally missed the largest downturn since the Great Depression. It is somewhat contrite in tone. The op-ed meanders around the subject with just enough inside baseball references to give it the tack of substantiality but after reading it I was left without a clue as to what was his point. I am temped to say it was something along the lines of "Well Economics is unreliable but we have already printed the class schedule so we might as well continue to teach the courses. And we don't want to just add to the unemployment problem." Toward the end of his op-ed, Krugman speaks about "salt water" economists and "fresh water" economists. I did take away from this that even the most notable experts in a field like Economics or Anthropology must reduce the blizzard of details to some simple formulation for the purposes of understanding and communication. The danger of course is that "the devil is in the details."

For me then the devil has the upper hand. As someone not erudite in these fields, I can at least imitate this one practice of the cognoscente and contrive a simple formulation. To wit: This economic crisis of our time may be profound or it may be a hoax. Either way I'm screwed and should concern myself with solving the problems of my nano-economic world. I wonder how much Powell's Books will give me for my copy of William Greider's "Secrets Of The Temple"?