credit bubble

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.”