It seemed as if the global economy were headed for the kind of crash we haven't seen since 1929. All the elements for a great financial meltdown and economic depression were in place last week-choked-off credit lines, massively leveraged firms, assets gone bad, sinking mortgages, panicked consumers and paralyzed companies. "What is different," says Harvard economic historian Niall Ferguson, "is that then the federal government and the Federal Reserve did all the wrong things. Now they're mostly doing the right things."As of this writing, we don't know the details of the plan that is being crafted by Henry Paulson and Ben Bernanke to restore confidence in the U.S. financial markets. It is impossible to be certain that it will work. But the administration and the Federal Reserve were right to intervene in a large and systemic manner. Modern capitalism depends on credit, and credit depends on confidence.
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