> In a crisis where you've only got a week or two
> -- and we are in such a situation -- you have
> to go with the Treasury secretary you've got
> and the Democrats you've got. Barney Frank and
> Chris Dodd are as far as the party is going to
> go right now -- there is nothing with their
> left to any power, and actually its kind of
> surprising and heartening that they finally
> have the power they have and that the Dems have
> deferred to them and grouped around their
> leadership.
>
> The argument that we can do better than this
> *eventually* is absolutely true. And there is
> nothing stopping us in theory from doing much
> profounder things after the election. I'm all
> for putting out radical ideas. And I totally
> agree that the one wonderful thing about this
> crisis is that it suddenly makes tons of ideas
> thinkable that two weeks ago were considered
> beyond loony.
>
> So by all means, talk about nationalizing
> finance and everything else. But talk about it
> in terms of what the Democrats ought to do in
> January if they win big. Talk about it in terms
> of a New New Deal. All of that will still be
> needed because we all agree the underlying
> problems are still there and still need to be
> addressed.
>
> But to be at all credible, all of that has to be
> separated the idea of opposing this bailout. If
> you think you can use this failure to
> fundamentally change the bailout's shape, and
> replace the TARP program with a mass preference
> shares purchase, then IMHO you've entirely
> misread the politics that made it collapse -- it
> wasn't the votes of the left that brought it
> down. And if you think we can just stand pat and
> take care of everything in the spring, IMHO
> you're not understanding what happened last week.
Michael has nailed it. The constraints binding us now will be a distant vision if the American economy cracks up. Whatever American politics becomes in a crash, the low odds are on humane.
One aspect of the clusterfuck that enables the "no, nothing" caucus is the lags. David Rosenberg (the Merrill Lynch economist Doug has quoted, who was one of the earliest proponents of the Swedish solution) has been repeating for months that the early 1990s consumer recession was preceded by a credit crunch which was in turn preceded by a housing peak, and that the lags for these transitions are can take a year or so to bleed through--they don't happen in an instant. Too many are oblivious to to the lengths of these lags, but we are likely to get a second lesson:
http://calculatedrisk.blogspot.com/2008/09/feds-lockhart-on-financial-crisis.html
http://krugman.blogs.nytimes.com/2008/09/30/death-by-plastic/
Shane