Wednesday, October 8, 2008

Fumbling in the Dark

I find Paul Krugman is a solid guidepost on economic subjects as well as issues of civil society. Over the years I've read his books The Conscience of a Liberal (2007, excellent!), The Great Unraveling (2003, OK but just reprints of short articles in the NY Times and Fortune magazine), The Accidental Theorist (1998, good but topical to the 1990s), Peddling Prosperity (1995, excellent), The Age of Diminished Expectations (1990, good), and Geography and Trade (1991, too hardcore for the casual reader).

His opinion of the bailout is that you have to "hold your nose" and pass it. He objects that buying troubled assets doesn't directly recapitalize the banks. Instead here is what he says today in his NY Times blog is the right approach:

Readers ask what I think should be done about the financial crisis. The answer is, what Gordon Brown in doing in Britain: a bailout, yes, but one that gives the government an ownership stake in the bailed-out institutions. That plus a serious fiscal stimulus plan that includes emergency aid to state and local government.

The Brown plan, by the way, is 50 billion pounds; scaled by GDP, that would be the equivalent of a $500 billion plan here. The headline number would be smaller than the Paulson plan, but the probable effectiveness much, much greater.
If you want to see a video, here are two good choices.

(1) Nov 3, 2007 Krugman gives a talk on The Conscience of a Liberal.

This talks about how the "Great Compression" (the reduction of differences of income under FDR through to the late 1970s) that fell apart under right wing politics. A key line from this video: "The highest paid hedge fund manager last year made more than all of the 80,000 teachers in New York City."

(2) Dec 14, 2007 Krugman gives a talk at Google on his book The Conscience of a Liberal

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