On Oct 6, 2008, at 5:31 PM, Gar Lipow wrote:
> This
> is an empirical argument and to make sense has to falsifiable by an
> empirical test. How bad can things get before the facts refute the
> idea that this was better than nothing. It can just be a matter of
> faith - no matter how bad the turn the economy takes this week, it is
> still better than would have happened without it.
We just don't know. There's no counterfactual available, nor are there any modern instances of letting a debt deflation continue unchecked in a rich country. "This week" is a ridiculously short timescale. We're going to have a recession, and maybe a bad one. But without a bailout, what do you think the results will be? Anyone who knows the experience of the 1930s (or 1870s) isn't willing to play chicken.
Doug