Saturday, August 28, 2010

"Muddling through ... the prescription of the moment"

by Calculated Risk on 8/28/2010 10:31:00 PM

A couple of earlier post that might be of interest:

  • Employment Report Preview: Will the unemployment rate spike higher?
  • Unofficial Problem Bank List increases to 840 institutions

    From Peter Goodman at the NY Times: What Can Be Done to Cure the Ailing Economy?
    THE American economy is once again tilting toward danger. ...

    Yet even as vital signs weaken ... a sense has taken hold that government policy makers cannot deliver meaningful intervention. That is because nearly any proposed curative could risk adding to the national debt — a political nonstarter. The situation has left American fortunes pinned to an uncertain remedy: hoping that things somehow get better.
    ...
    The growing impression of a weakening economy combined with a dearth of policy options has reinvigorated concerns that the United States risks sinking into the sort of economic stagnation that captured Japan during its so-called Lost Decade in the 1990s.
    ...
    Six months ago, Alan Blinder, a former vice chairman of the Federal Reserve, and now an economist at Princeton, dismissed the idea that America’s political system would ever allow the country to sink into a Japan-style quagmire. “Now I’m looking at the political system turning itself into a paralyzed beast,” he says, adding that a lost decade now looms as “a much bigger risk.”
    ...
    By default, muddling through has emerged as the prescription of the moment.
    "Muddling through" and "hoping that things somehow get better" seems very defeatist - but I think it is an apt characterization of the current situation. There is always more that can be done ... and I think some people are confusing cyclical deficits with structural deficits. Oh well ...