(The ears of the President. pic: Kevin Coombs)
HAS TEAM OBAMA ALREADY SEALED THEIR FATE?
We like to think that we have second chances. Afterall, President George Bush astoundingly got one, at the polls, after no weapons of mass destruction were found. Of course, his Presidency became a double-speak nightmare, perhaps even worse than at the outset ...
67 days or so into the Obama Presidency, they have been forced to make choices of such large scale that their own fate may well have been sealed. Any willingness of the electorate to let this President (and his party) rise above his own policies is still undetermined for quite some time to come, most likely.
A COLLECTIVE ACTION PROBLEM, OR "THE REVENGE OF MICRO"?
We might be in a situation in which it is rational for the banks (and for individual legislators?) to fight macro-medicine, like a serious-going 'nationalization' of likely-to-be-insolvent banks.
It might be that the legal hurdles to nationalization are ... beyond reach, either in finite time or in principle (that would certainly explain why Helicopter Ben has only admonitions so far, not a comprehensive proposal).
It could be that the policy course was set, fixed among the ruling elite, wittingly or no, when Paulson & Co. rammed through a non-nationalization plan last fall.
It may also be that policy makers have been seduced into an (Asian-style) policy of hope, hoping that asset values are not as bad as we think, hoping that asset prices or business prospects can be resuscitated without market clearing, hoping that banks will 'earn-out' of their problems in time for recovery to 'take hold'.
If the latter is true, America is most certainly, as Paul Krugman says, Japan. Be afraid.
[Once you think in those terms, you start to see confirming evidence of it - not the best kind of evidence, but still chilling: I just read someone fairly serious suggest that the U.S. raise interest rates ...].
WHEN 'SAVING FACE' IS NOT A POLICY
If Krugman-sensei is right - and I have no way to judge whether the problem is concentrated or as large as his argument presupposes (not wholly, but in important respects), then there is only one message for David Axlerod (and Senator Schumer?): Bad news does not get better with time.
Wednesday, April 1, 2009
The Seduction of Hope
