This situation has come right in the wall

The current economic crisis will remain forever related to the madness of Alan Greenspan. The responsibility of the Board of Governors of the Federal Reserve of the mid-1990s to today is heavy indeed.

Supported by surveillance agencies who did not play their role, the easy money policy did inflate as never real estate bubbles and consumer credit in the United States and other countries. Today these bubbles have burst.

In the heart of the crisis: the rise of real estate and stock prices, a far cry from the historical reference points. Alan Greenspan has fueled two bubbles: Internet between 1998 and 2001 and, subsequently, the real estate. In both cases, with the rise in the value of the assets, American households have thought that they had were considerably enriched, which urged them to increase borrowing and spending. All the more easily that the deregulation of the credit markets thus invited to risky loans. With the boom in real estate and stock market investments, net wealth of American households has risen by around 18 trillion dollars between 1996 and 2006. This situation has come right in the wall. Real estate has skyrocketed in 2006 and prices of stocks in 2007. With the bursting of the bubble, a fictitious capital of approximately $ 10 trillion, or even of 15 trillion, will be deleted.

Several complex events occur simultaneously. First, the homes strongly reduce consumption as they appear to be much more poor that a year ago. Second, several institutions, such as Bear Stearns and Lehman Brothers went bankrupt and caused even greater losses particularly among their shareholders and creditors.

Third, commercial banks have also much lost in these operations; their capital was erased much.

Finally, the collapse of Lehman Brothers and AIG has undermined the financial confidence.

The challenge now for political leaders is to restore enough confidence so that companies can again obtain credit in the short term. The next step, should encourage the restoration of a bank capital that commercial banks resume lending for long-term investments.

Will however these approaches also urgent they are, not prevent a recession in the United States, or in other countries, such as the United Kingdom, the Ireland, the Australia, the Canada and the Spain. The Iceland is threatened by a national bankruptcy. This is not a coincidence: except the Spain, all of these countries have explicitly joined the American philosophy of "market economy" and insufficiently regulated financial systems.

Yet, whatever the consequences in the deregulated "in the Anglo-Saxon" economies, they will not lead to global catastrophe. I see no reason to sink into depression, or even a global recession. Of course, the United States will cross a period of declining revenues and sharp rise in unemployment, which will reduce the volume of imports. This will not prevent other parts of the world to continue their growth. Many powerful economies, such as those of China, the Germany of the Japan and Saudi Arabia have high export surpluses and can lend to the rest of the world, especially in the United States.

The Governments of these countries should now cut taxes, loosen credit conditions and public investments in road infrastructure, energy and housing.

What is the United States, the undeniable impact on millions of people, which will be even more painful year next in view of the rise in unemployment, require a review of the effective economic doctrine since Ronald Reagan became President in 1981. The tax cuts and deregulation generated frenetic consumption which was significant as long as it lasted, but also a vast inequality of income, many super-rich, a considerable foreign debt, non-renewal of the infrastructure and, now, an incredible financial mess. The time has come to launch a new economic strategy, a kind of New Deal.