I have not posted on this topic lately. When I first started talking about it a couple of months ago it was not a daily news item. But I’m no longer ahead of the curve here and can’t add too much to what you can read everywhere else.
But, be sure to read this post from Krugman. The take-away message is that with the actions being taken by the government, the Japan Scenario is looking more and more likely.
The main issue is that we continue to refuse to nationalize the banks. It turns out that the “stress test” isn’t very stressful at all. And, as Bernanke and Geithner have stated this week, we will continue to fund the banks, letting them burn through our cash, without requiring any real change on their part.
The Japan Scenario is better than Great Depression II but it is not as attractive as the Swedish Model (rapid bank nationalization and restructuring) in my opinion.