Back last November, I said that the Obama administration needed to do five things:Can we do the cooler thing now?1. Expansionary monetary policy at an appropriate scale.Bernanke has done (1). Summers and company have done (2) at perhaps half-scale--but thanks to the Republicans and Senator Nelson that was the biggest fiscal boost progrtam that could get through congress. Geithner and his skeleton staff are doing about half of (3)--or perhaps less. And I see no signs of (4) or (5).
2. Expansionary fiscal policy at an appropriate scale.
3. Massive bank recapitalization--or nationalization--so that banks believe that they can be banks that start lending again rather than being zombies that think they have to hunker down and minimize risk in order to keep the next negative shock from destroying the institution.
4. Massive buy-ups of mortgages by Fannie and Freddie so that (a) mortgage deals could be reworked, and (b) the supply of risky assets on financial markets that the private sector could be reduced in consonance with the banking system's reduced risk tolerance.
5. Design the regulatory system for financial markets going forward.
This is much, much better than the Bush administration. But it is not reassuring. We might still get out of this "OK," where "OK" means a headline unemployment rate that stays below 10%. But we might not...
[ cf On the Economy, Obama and Company Are Now Batting 2 Out of 5... ]
Can we follow in the wave of the New Day In America and simply abandon reason, and start what ever newer Cargo Cult will bring back De plaines so that we can all once again live on Fantasy Island where our Mark To Madness is still considered the hippest coolest post surreal thing ever...
Or MUST we just hunker down and do the stuff like deal with financial stuff, you know, like one of the Tall Ones.... You know, act like we were the adults, and not like some collection of chidren waiting for the Majikal Tooth Fairey, in a troika with Rainbow Randolph and Smoochy, will wave their majikal dildo and we will all be majikally unFscked!!!