Eric Janszen in a Harpers article agrees. “Clean” energy? It’s The Next Bubble.

I’m not so keen on these ‘Treasury certificates’ mooted by the Titanic Tandem. This is, to put it bluntly, a direct bailout of insolvent banks’ bondholders. The banks are bust; their bonds are toast; giving them Treasury money to play with, putatively at a profit which ‘re-capitalizes’ them, just means that the banks bondsmen get paid off—out of the Treasury. Rotten thought. Look, why don’t we take those Treasury $$$s and JUST CAPITALIZE ENTIRELY NEW AND UNENCUMBERED BANKS. As they turn profitable, they repay the Treasury, same concept but with out the bailout for busted investors. Yes, this would provoke runs on the likes of WaMu and HSBC: boo-hoo for them, they’ve played the game like duffers and they can get written off.

Re: the dollar, I don’t think that we will see a dollar crisis as a result of foreign governments ‘dumping dollars.’ How? They ARE the market for Big Dollar Debt, so who would buy? Dumping the dollar would be perceived as a hostile act domestically, but also would draw the ire of all other major dollar holders for killing _their_ stakes as well. No sovereign holder of big dollar debt is going to dump; it’s not even clear that they can slow down their acquisitions. The threat to the dollar comes from private acquireres. The dollar tanks if at some point some large buyer says, “So sorry, but I can’t take dollars for this transaction. I can take currency X, currency Y, currency Z; I can take oil futures; I can take diamonds. I cannot take exposure to a fading dollar, though, unless a premium in the above forms is included. So sorry.” In the Spring, we heard whispers of this. Not coincidentally, in my view, that was the time the Fed and the Treasury started to get wild and crazy in their auctions and interventions. Will this happen? Couldn’t say, but when and as hemorraghing zombie banks start dissolving we’ll find out.

I’m with Steve above as well that the US has been ’stimulating away’ for two generations and recklessly so for over close on thirty years. More stimulus may buy us a few more years of baubles but we need to start generating some real value and real profit if we are going to keep from defaulting on our mountain of external debt. Not even live well or better, but avoid defaulting. And no proposal raised in the article leading off this post, with the possible exception of ‘leading the way in clean energy’ which is completely speculative and thus something of a chimera, involves any real profitmaking value added. And that is the real problem. If we don’t start making some real profit, we will all start living much smaller: Those are the only two real choices. And nobody employed in FIRE adds any real value.

Can I add a few more?

Food inflation
Healthcare spend being a totally ridiculous % of GDP in relation to its productivity.
Military spending ditto.
Widespread incompetence and corruption in the administration(s)…

This isn’t supposed to be an exhaustive list.

Manufacturing is only 11.7% of GDP (2007, source: NAM). The J curve won’t describe the effects of a lower dollar these days.

Like a lot of other fixes being floated, Rohatyn’s proposal is what I call cargo cult economics — the repetition of past solutions without any recognition that we’re living in a different world.

Government has been stimulating the economy uninterruptedly since the Depression, to the point that the US can’t pay the bill even when the debt-driven economy appears healthy. That continuous stimulation has bought a lot of votes over the years; now it’s part of a system that needs to be fixed, rather than being an exogenous force to jump-start things.

Restructuring entire systems … the tax system to reflect the current unfairness of rates and loopholes. The financial system around a Public Central Bank that arbitrates all credit with interest rate differentials , produces money and credit without debt and allows the interest rate to float. A total revamp of our trade system, based on reciprocal trade so that deficits don’t come about.

Unfortunately corporate influence will never allow this to happen until the country is in dire shape when it may be too late to salvage what’s left of our current economy.

Where is the money to carry out their proposals supposed to come from?

Worse, who in their right mind thinks for one second that any such endeavor will not be ‘prototyped’ here but manufactured in the ‘cheaper there’?

We’re already on the brink of a ‘dollar meltdown’…I’m sure ‘printing more’ will help this situation bring our civilization crashing down around our ears!

These two are either very young, economists, or both!

Not convinced.

The core problem of the US economy is the orgy of bad debt indulged for the past 7 years and its broken, untrustworthy, “pass the buck” financial system. I’m not a fan of the late, unlamented Andrew Mellon but there certainly is purging of some sort or another that must be done at one point, meaning higher interest rates.

Or we’ll stay stuck in zombie land.