What is needed is concerted effort to sever the hands of dying financial institutions that are currently around the neck of the entire US society before that sector drags us all into an early grave. It is NOT a question of spending or guarantees per se, but rather a question of the long term effectiveness of that spending and those guarantees and the constraints they place on future policy. See the second link in my comment down thread. It is to a paper by Simon Johnson showing the consequences of such decisions. See also the post based on Edward Harrison below. We can say "Fuck inflation", but we had better be prepared to be well and truly fucked by inflation if we are unprepared when recovery is underway. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
The problem is wealth concentration. What the US has now is a ghost economy, populated entirely by chimeras, supported by a huge pile of government-backed 'Would I lie to you?'
But there's no foundation. So the real economy will remain in depression while the ghost economy resumes modest growth - for a while, until the 'Would I lie to you?' runs out.
Here's a traditional conservative's reaction:
Merkel for the Fed The German leader's welcome rebuke to central bankers. To the Red Sox winning the World Series, we can now add another miracle for the ages: A politician demanding tighter money. We refer to German Chancellor Angela Merkel, who in a Berlin speech Tuesday rebuked the world's central bankers, notably including the U.S. Federal Reserve, for being too politically accommodating. Hallelujah, sister. (...) Notwithstanding Mr. Bernanke's "comfort" with his actions so far, the world is wondering when the Fed will start to remove the flood of money it has injected into the economy during the crisis. Mr. Bernanke says not to worry, as his mentor Alan Greenspan also did yesterday. But this is cold comfort given their earlier track record. The Fed's habit is to look at backward indicators, such as the cost-of-living index and the jobless rate, rather than at currency and commodity prices that can warn of asset bubbles and inflation ahead. This is precisely the mistake both men made in 2003, as the recently released Fed transcripts from that year illustrate. The warning that Mrs. Merkel -- and China and the financial markets -- is sounding is whether the Fed will have the political courage to start removing that liquidity even if the unemployment rate is high, and before it creates another mess.
To the Red Sox winning the World Series, we can now add another miracle for the ages: A politician demanding tighter money. We refer to German Chancellor Angela Merkel, who in a Berlin speech Tuesday rebuked the world's central bankers, notably including the U.S. Federal Reserve, for being too politically accommodating. Hallelujah, sister.
(...)
Notwithstanding Mr. Bernanke's "comfort" with his actions so far, the world is wondering when the Fed will start to remove the flood of money it has injected into the economy during the crisis. Mr. Bernanke says not to worry, as his mentor Alan Greenspan also did yesterday. But this is cold comfort given their earlier track record. The Fed's habit is to look at backward indicators, such as the cost-of-living index and the jobless rate, rather than at currency and commodity prices that can warn of asset bubbles and inflation ahead. This is precisely the mistake both men made in 2003, as the recently released Fed transcripts from that year illustrate. The warning that Mrs. Merkel -- and China and the financial markets -- is sounding is whether the Fed will have the political courage to start removing that liquidity even if the unemployment rate is high, and before it creates another mess.
Thanks. It's been a long day, and I needed a good laugh.
You really can't be serious bringing the Journal in this.
Yes, those great defenders of traditional conservatism at the WSJ.
Wow. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
Now, as someone who knows plenty of stats, you also know that this is probably the single most dishonest, laughable graph ever published in a major newspaper. "If only the Dems would quit being a bunch of commies and cut corporate tax rates by ten points, the revenue would come pouring in. Just like Norway!
The Journal supported all of the adventures of Chimp McFlightsuit and Pencil Dick. It supported the tax cuts, the wars (and their privatization through mercenaries), the attempt to waste $2tn privatizing Social Security, and on and on.
If these guys aren't neolibs, I don't know who could possibly qualify anymore.
Deficit hawks? We'd have long since collapsed if we'd followed the WSJ. Those idiots are even more out to lunch than the last administration was. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
You may find it useful if you ever want to do this kind of exercise again.
Neolibs like Krugman, Stiglitz, Roubini, et al?
Yeah.... Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
