What difference does it make to the recession if Citibank and Bank of America fail?
Good question. Here’s a roundabout answer. In some sense, all of history’s progress from lives that were nasty, brutish and short to today’s splendiferous buffet of iPhones, nine-month courses of physical therapy, and year-round fresh broccoli can be summed up in three words: gains from trade. We live better than a tribe of chimpanzees roaming through the primordial forest because we specialize and then exchange the fruits of our skills with each other. Trade, as the ecoomists say, increases the size of the economic pie to be divided between us. But trade introduces an element of uncertainty into our lives above and beyond the possibility that we will be eaten by something bigger than ourselves, or starve to death when the rains fail. We still have to worry about those uncertainties, although the monsters now most likely to hasten our demise have four wheels and cost entirely too much to service. But now we also have to worry about our trading partners. In an advanced economy like the
