Felix Salmon Scotches the Kanjorski Financial Armageddon Myth
Remember the point last September where treasury secretary, Paulson delivered a ‘secret’ message to congress that was designed to scare them into action? Many people have now seen the infamous clip where Democratic Representative Kanjorski explains what Congress was told (2 mins 20 secs into this clip):
“by 2pm that afternoon [18th September 2009], $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.”
Like the myth of Popeye’s spinach, which was due to a decimal point error in its iron content at a Chicago food fair, Kanjorski’s armageddon myth which will, no doubt, form a part of every conspiracy theorist’s armory for years to come, is based upon a quote of a misquote which exagerates the truth by a factor of ten and which Felix Salmon wisely and definitively demolishes:
“This is all, frankly, fiction, and it’s not clear where most of it came from, although maybe Kanjorski’s “friends” on Wall Street are the same people as Michael Gray’s sources at the New York Post. Thinking back to that crazy week it’s easy to get details wrong, especially when you’re speaking off the cuff on a call-in show. But let’s stop treating it as though there’s any substance to it.”
Thanks Brian Donovan.
Update: The FT’s Alphaville team are suggesting that there is substance to the Kanjorski meme, and that truth is somewhere in the middle i.e. $500 billion in panic redemptions were requested but Paulson persuaded them to be stalled.