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Economics 101: Watch me fail to explain the crisis to the duhs and ignos

Commentators keep trying to explain the financial meltdown and subsequent bailout debate by using analogies that "average Americans" can understand. We hear such things as "imagine Wall Street was your kid that ate a big bag of candy and got sick, then wanted more candy," etc.

The problem is that the calamity is so bad partly because it is not simple. The venality behind it is something everyone should understand (and many "average Americans," with their get-rich-through-liar-loan-financed-rent-houses schemes participated in). But the essential mechanics and details of how we got here, and how the situation might be improved, are highly complex. This is a stark reminder of a danger facing us: America is saddled with one of the least informed electorates of an advanced nation, and one hardly as intelligent or engaged as their forebears who actually built the wealth in money, institutions and ideas that we are now rapidly throwing away. It shows the risk of the continued governance by "conservatism," which by its very nature can’t handle complexity.

Here’s an analogy for the bailout: triage, longer-term care and rehab. The paramedics and ER personnel need to identify those that can’t be saved and set them aside, while focusing on the most life-threatening cases where the patient can still be saved, leaving the less injured for later. But I can dumb it down no further. I can only add complicating factors. As in, the paramedics have tools that will have unpredictable effects not only on the patients but also on everyone in the world. The patients’ bodies are wired into everyone else in the world. And the medics are working on injuries they never trained for.

Simple enough? Of course not.

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Wishful-thinking stimulus

There’s a great deal of silliness and sophistry about the economy at this dangerous moment, but why should it be different from anything else in American life?

Washington debates a “stimulus” package of tax cuts and newspapers write headlines to tell “average readers” (whatever the hell that means) that the feds will put hundreds of dollars in their pockets. Wall Street does a dead-cat bounce and commentators who were darkly warning of recession are now talking about a miraculous comeback. In the New York Times, the normally sensible David Leonhardt was saddled with a headline that emblemized the silliness: “Worries That the Good Times Were Mostly a Mirage.”

In reality, the economy risks finally tipping over from a series of imbalances and forces long in the making. The Fed is very limited in its ability to right the ship. And any “stimulus” risks making things worse, aside from extending unemployment benefits, which is somehow anathema to “conservatives.”

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