If you like to read longer, detailed discussions from economic professors, there are 2 good posts in The Baseline Scenario today. One provides much more commentary on a topic I posted on 2 days ago, the Fed’s new fear of deflation and actions they are contemplating to counter it. The second discusses another of my themes, the human tendency to create bubbles and the structural issues in the financial system that need to be addressed.
A third post is a guest post, Obama Plan Is Bold, but Not Bold Enough, from The Baseline Secenario team in the WSJ’s Real Time Economics blog. This is a lengthy post with commentary along the now common themes of the need for massive government spending to substitute for the lack of private sector and consumer spending, the need to recapitalize banks to restart lending, and the need for a pro-inflation policy to fight deflation. The final point that they make that has not been discussed enough of late is the need to put a floor under the housing market. It is abundantly clear that the recession in the housing market is far from over with housing prices continuing to fall. This creates an insurmountable negative-wealth effect in the consumer sector, the single largest sector in our economy. There can be no larger economic recovery if there is not also a recovery in the housing market.