naked capitalism

ndk says:

Martin Wolf: But what if we are now making new and even bigger errors in rushing back to Keynes? The thought worries me. What if now that households in the US and UK are no longer able, or willing, to borrow any more, we are set on breaking the back of taxpayers, instead? Is the end of this crisis the destruction of the credit of some of the world’s most creditworthy governments?

Yes!! Why does it always fall to the British economists to put the kool-aid down first? Challenging groupthink in its own house!

What we need right now is water: a.k.a. debt liquidation. And the longer we fail to recognise this simple fact, the longer we fail to provide it, the worst it’s going to get later on.

SuddenDebt’s words, and I couldn’t agree more.

Thanks, Yves, this was a really uplifting set of links.

Yves Smith says:

john,

Thanks for the holiday wishes (and to those of you who also extended Thanksgiving greetings that I neglected to thank in earlier posts today. I did read them and very much appreciated the fact that you took the trouble to write).

ndk,

I really did like the Wolf post. The FT has also featured some comments that have worried out loud about the failure to consider the risks of the rescue program. I am afraid, however, that the prevailing mindset will remain intact: if the current program fails to bear fruit, the assumption is that we need more stimulus, as opposed to considering that we might need a different set of remedies.

Anonymous says:

Yves and Co, hope all enjoyed succulent bird with all the trimmings. Wish I could have shared some of my old family recipe with you all. 2KG of cranberry’s and a bottle of fine Bourbon, set to soak for two weeks, yummy!

Skippy

River says:

Yves, Schiller expresses his doubts about the effectivness of the bail outs in the three part You Tube link below. Schiller seems to be one of the few that realize that the ‘cultural mood’ of the people has changed and he makes several comparisons of the current crisis to the great depression. Schiller points out that his wife is a psychologist, as is mine. Perhaps that is why we both have similar takes on fiscal/monetary stimulus vs ‘public mood’.

It appears to me that those in charge of the Fed/Treasury and the administration in general believe that monetary and fiscal response will overcome a shift in ‘cultural mood’. I doubt very much if those in charge are correct. Ego is at work, imo. Those in power are loath to admit that situations arise that they cannot correct. Of course, such an admission would be admitting defeat.

Shiller: Crisis May Run For Years and Years

http://econvideo.blogspot.com/2008/11/shiller-crisis-may-run-for-years-and.html

russell1200 says:

The comment posted under the “C Bailout” story was interesting. The WaMu failure as conspiracy theory make for an interesting story.

I am not sure I buy it, but it does feel a little like the second coming of Fisk and Gould.

Tortoise says:

This being a slow day, I would like to submit a link of a goodie though slighly oldie article:

http://www.ft.com/cms/s/0/59bd87b6-bd8c-11dc-b7e6-0000779fd2ac.html?nclick_check=1

Highlights: America’s massive current account deficit absorbs about 75 per cent of the world’s surplus saving… A sharp decline in asset prices is necessary to rebalance the US economy. It is the only realistic hope to shift the mix of saving away from asset appreciation back to that supported by income generation. That could entail as much as a 20-30 per cent decline in overall US housing prices and a related deflating of the bubble of cheap and easy credit… As consumption slows and household saving rises in the US, the need to import surplus saving from abroad will diminish… The global economy will emerge bruised, but much better balanced.

That’s Stephen Roach in January 2008. Could it be that we are not experiencing a crisis but rather the painful side effects of the cure that was needed all along? Food for thought.

dearieme says:

Martin Wolf in cracking form:-
“Keynes said, of course, that “practical men … are usually the slaves of some defunct economist”. So, of course, are economists, even if the defunct economists are sometimes still alive.”

lineup32 says:

Tortoise said…
This being a slow day, I would like to submit a link of a goodie though slighly oldie article:

Thanks for the link. Another bit from the link:

“Washington policymakers and politicians need to stand back and let this adjustment play out. Yet the US body politic is panicking in response – underwriting massive liquidity injections that produce another asset bubble and proposing fiscal pump-priming that would depress domestic saving even further. Such actions can only compound the problems that got America into this mess in the first place.”