As the world ponders the terra nova of zero interest rates for an indefinite period in the U.S., all one can think is how avoidable this situation is and how the Fed's actions appear like one-hand clapping, under the Bush Administration.
RIGHTWING IDEOLOGY COST US THE BOLD INITIATIVE OF 2007
Imagine a world in which we didn't have right-wing ideology, but a positive, healthy, rapidly-adapting posture toward regulation.
The Bush Administration, arguably, has done nothing fiscally for the U.S. economy since they tried to quell a bank-panic using a 3-page liquidity plan, except sign up for additional unemployment benefits.
Then, imagine a world in which the Federal Reserve, recognizing that regulation had not adapted quickly enough, monetized the entire sub-prime mess. We would never have had a banking panic. At best, we would have had a double-whammy from inflation (oil-supply shock and monetary growth), but we know how to fight inflation a lot better than we know how to deal with a liquidity trap.IMAGINE TWO HANDS CLAPPING
The Bush Administration, arguably, has done nothing fiscally for the U.S. economy since they tried to quell a bank-panic using a 3-page liquidity plan, except sign up for additional unemployment benefits. Their debt-spend war-policy doesn't count.
Since then, the hand of fiscal policy has been unmoved, right?
In fact, fiscal policy, cast in terms of expectations, has been arguably restrictive. Even assuming the massive tax-cut that the rightwing wrongly thinks is appropriate, what industry is going to employ 2-million workers that will get dropped if the U.S. Auto industry goes under?
A fiscal response to the foreclosure problem has been put on the deathbed of further study, by Little Hoover's administration.
Everyone, but Bush-Paulson, are noticing how fast this crisis is progressing. Those two think that there is enough time to kick the can down the road.
