I only read Nobel Prize-winning economists. How about you?

A couple of years ago, when I returned to India from my last sojourn in Europe, I discovered that one of the syndicated columns that had started appearing in my newspaper of choice during my absence was by someone named Paul Krugman, whose columns were reprinted from the New York Times.

An unabashed liberal (yes, I can already see my GOP-leaning friends--and there are a lot of them--shaking their heads in disapproval), Krugman seemed to spend all his time bashing the economic policies of the 43rd President of the United States. I'll admit that I enjoyed reading these columns. It was only later on that I discovered that far from being a liberal Rush Limbaugh-type blowhard, Krugman is actually a professor of economics at Princeton University.

Of course, all the fun and games ended and things got serious with the current financial meltdown, and rather than just point fingers at the GOP, Krugman spent a lot of time explaining why things had gone wrong and what was needed to put it right.

Remember my own post on my opposition to the original $700 billion bailout? Several of you were even kind enough to let me know that you agreed with my amateur ramblings. It was inspired by Krugman.

That's Nobel Prize-winner Paul Krugman. Yes, I am only inspired by the best.

Incidentally, I think Krugman's blog post reacting to the news of his award deserves a prize of its own.

Congratulations, Dr. Krugman!

What's going on #4

Seven hundred billion dollars.

Say that slowly. Now say that in a dramatic voice, with dramatic background music. Raise your pinkie to your lips if you like.

$700 billion is the amount of money that US Treasury Secretary, Henry Paulson, wants to give to Wall Street to bail it out of a mess that was created largely by Wall Street’s own greed.

Do you know how much money $700 billion is? It is seven times more than what Dr. Evil demanded to not destroy the world. In other words, it is seven times more than what a ridiculous villain in a ridiculous movie thought was too ridiculous for the world to afford to pay him to stop his ridiculous plan.

This whole sub-prime mortgage crisis that has been unravelling for the past two years is so (gosh, here’s that word again) ridiculous that it is unbelievable that no heads have rolled. Literally.

I admit that I don’t know all the minute details, but this is what I believe is generally accepted as what happened:

Banks and financial institutions lent too much money to too many people without getting enough collateral in return. Once these people couldn’t repay the loans, big matata.

Some of the biggest names in the banking industry, like Lehman Brothers and Merrill Lynch, who really ought to have known better, have become bankrupt, and millions of lives have been ruined.

The three most galling points of this mess:

1. When I was doing my MBA in the UK, I asked my Economics lecturer what would happen if there was a mass defaulting of loans by consumers. He said there wouldn’t be any trouble as the amount of consumer debt wasn’t that significant. Oh, really?!

2. The big shots at these banks and financial institutions who contributed mightily to this mess by their own greed still got their multi-billion dollar paychecks, and no one is going after them. (Daniel Mudd, ex-CEO of Fannie Mae, earned $13.4 million in 2007 while leading his company to a $2.1 billion loss.) The $700 billion bail-out, as proposed by Henry Paulson last week, is a free handout to these crooks. Stop the plan!

3. The western country least affected by the crisis? France, and its lousy economy. (I told you it was “Gaul-ing”. Count this as the latest “Pun of the Weak”.) Apparently in France, if one wants a loan, one has to put down a whacking great down payment first. And monthly instalments are limited by your monthly income, so you won’t be lent more than you can repay. Well, duh, no wonder they're not affected!