IMO Mr. Obama should have tied financial reform into stimulus-as it's our most vibrant economic sector- and gotten a twofer. For now, IMO he should cut a deal on health insurance reform AND do financial reform. And he should go back to the Bush strategy of doing not much of anything in Afghanistan, say that the Bush economic wreck makes a major war unaffordable, that the failure of Bush to do good things in Afghanistan because of the Iraq diversion makes victory in Afghanistan unlikely, and thereby be a truly transformative and supple politician.

IMO he won't do that because he's a front man for the same financial Establishment as his predecessor, no matter his social views.

Nice political illustration… It seems right on the mark.

Glad to see you addressing both Steve Keen and Richard Koo recently, as I think they offer the two best complementary descriptions of the crisis (though they differ from each other in predictions and prescriptions).

IIRC Keen has commented that deleveraging may be slowed down by government response, for example pushing out the next nasty down-leg by 6-12 months… but that private sector deleveraging can't be stopped this time. I agree with him on both counts. If correct, that seems to make a “reflation” lasting years unlikely (though not impossible if the global decoupling fantasy comes true very rapidly). I think where Keen may have a chance of being wrong is the potential for fiscal stimulus to create an outcome closer to Japan's than the Great Depression. He has acknowledged that he hasn't had time to add government explicitly to his dynamic models yet.

As for “prevention plan”, Keen doesn't seem to think this debt deflation can be prevented from running its course, though he has consistently made two specific reform proposals to prevent future large asset bubbles.

UPDATE: I should clarify that while it isn't strictly “prevention”, Steve Keen has brought up the need to ultimately abolish (via a modern version of a “debt jubilee”) a certain amount of excessive debt that shouldn't have been taken on to begin with. So that is a concrete suggestion though I don't think he expects it to be politically realistic unless a lot changes first.

IMO Mr. Obama should have tied financial reform into stimulus-as it's our most vibrant economic sector- and gotten a twofer. For now, IMO he should cut a deal on health insurance reform AND do financial reform. And he should go back to the Bush strategy of doing not much of anything in Afghanistan, say that the Bush economic wreck makes a major war unaffordable, that the failure of Bush to do good things in Afghanistan because of the Iraq diversion makes victory in Afghanistan unlikely, and thereby be a truly transformative and supple politician.

IMO he won't do that because he's a front man for the same financial Establishment as his predecessor, no matter his social views.

Nice political illustration… It seems right on the mark.

Glad to see you addressing both Steve Keen and Richard Koo recently, as I think they offer the two best complementary descriptions of the crisis (though they differ from each other in predictions and prescriptions).

IIRC Keen has commented that deleveraging may be slowed down by government response, for example pushing out the next nasty down-leg by 6-12 months… but that private sector deleveraging can't be stopped this time. I agree with him on both counts. If correct, that seems to make a “reflation” lasting years unlikely (though not impossible if the global decoupling fantasy comes true very rapidly). I think where Keen may have a chance of being wrong is the potential for fiscal stimulus to create an outcome closer to Japan's than the Great Depression. He has acknowledged that he hasn't had time to add government explicitly to his dynamic models yet.

As for “prevention plan”, Keen doesn't seem to think this debt deflation can be prevented from running its course, though he has consistently made two specific reform proposals to prevent future large asset bubbles.