If you give people money in consistent doses they will create jobs–the government will just screw it up because the central planners can’t react quickly enough.

If the Chinese and Japanese and Saudis don’t like it they can unpeg their currencies (yes, I know the yen isn’t officially pegged.)

The glut of luxury is a pure supply/demand question because low interest rates made luxury building (mostly condos) more profitable. In fact, you saw a wave of hotel/rental conversions due to the fungibility of housing stock and the profitability of the condo market. The Plaza Hotel in NY is a perfect example.

I should add, it is this kind of market distortion that makes me detest zero percent interest rates.

Well said, Ed. I agree that the political process tremendously limits choices. A true stimulus coupled with a serious jobs program could work, but I suspect that our political process would never allow the freedom necessary to really do something the right way.

Ideally, the USG should focus on big ticket programs that create jobs and provide something useful to the country, not just in the immediate term, but have a lasting impact. The problem is that any program will need to be equally spread across all 435 Congressional districts to have any hope of passing.

As a result, instead of worthy projects being selected, the politically savvy will be favored and this is likely to result in less than useful activities that merely line someone’s pockets with little impact for the rest of the country. Isn’t this what happened with saving AIG? All the talk was of doom and gloom if AIG wasn’t saved, but from the perspective of Main Street, AIG was saved, the rest of the TBTF entities were saved, and the rest of the country continued to suffer.

When we will realize that “financial” products don’t possess the same diffusion as real “stuff” that people need adn want to buy? We should be focused on moving away from a presumed dependency on economic growth arising out of financial products and focused our time, money, and efforts relearning how to make “stuff” that we and the rest of world need and want.

Perhaps if the financial industry were made boring again (this can be an output for regulators ), we might encourage our smartest and brightest back into industrial R&D making things, rather than spending their time trying to figure out a way to extract fractions of a penny out of every financial transaction. Maybe we need to treat the TBTF entities like utilities (which is pretty much all they really are anyway). And no, I’m not worried about “losing” financial leadership to someone else. It doesn’t directly contribute to improving our standard of living and why not let someone else struggle with “regulating” out of control TBTF while at the same time, watching their jobs evaporate for their Main Street.

Repost portion: On deficit spending, my take for a while, starting on Krugman’s blog (although the Nobel laurate didn’t seem to take up the thought) was that all the economists and advisors who bank (ha ha) on their studies of the Great Depression seem to have gotten the basic analysis all wrong. In fact an open-minded read of the history suggests that there were, and probably now are, three distinct phases: Crash, slump and then depression.

So the depression-fighting policies may not be misguided but they are premature, and as we are seeing have left us weaker than before. Meanwhile we do nothing to deal with the crash (oops too late) and the slump. So when the depression finally gets here–2011 according to my math–we will need a good big stimulus. Bummer about the ammo supply, eh?

I do have some careful thoughts about the slump–bank lending, small businesses, safety nets etc.–but hey, who cares? The depression is so much more sexy.

What makes me question the Krugman view is that the Fed’s effectively 0% rates seem to just make the spread between the rates the banks borrow at and the banks lend at that much greater. Great for the banks, but how much does it do for everyone else? No reasonable person would suggest high Fed rates at this point, but does 0% really help anyone else? And isn’t letting the banks recapitalize on this spread just monetizing the banks’ bad debts? I thought monetizing debt was a big non-no, but if it’s necessary, why shouldn’t the taxpayers get the free ride instead of the banks? Any comment?

“serious social unrest as the outrage will certainly spill over into populism”

Populism doesn’t necessarily lead to “social unrest”, certainly not of the violent sort. If anything it’s a necessary democratic outlet. A loud protest is not a riot (much as the Pittsburgh police may not appreciate the distinction). Please don’t misuse populism as a synonym for demagoguery.

I am just waiting to the next species that will replace us to arrive, hopefully they have very long arms so they can reach the fridge all the way from the living room where the couch and TV are.

By the way, about genetic obesity. Are there naturally obese chimps in nature? Obese flemencos in the wild? Any obese sequoias? Any obese reeds? Or does that only happen to the masters of the universe – Homo Not-So-Sapiens Not-So-Sapiens?

Marshall is clearly brilliant in his technical assessment, but when it comes to actually spending said required deficits, greedy, evil people start rubbing their hands together. This is where the political process seriously distorts and flaws Marshall’s brilliant work. In other words the execution of plan is as important or even more important than a plan.

Despite this I still think the political process in America will ensure “muddlenomics” for at least the next 2-3 years – or at least until unemployment passes 12%.

Keep up the good work.

I’m a landscape architect and have experienced a similar slump in the wake of so many McMansion slum-dividers pulling up stakes—while driving their investors, consultants, contractors, and suppliers into bankruptcy. When the next crisis occurs we must insist not only on a more humane, sustainable commonwealth economy, but also on more humane, sustainable, green and artful communities to live and love in, built on more than speculative values.