- Op-Ed Columnist - Paul Krugman - Decade at Bernie’s - NYTimes.com"
"[...] the policies currently on offer don’t look adequate to the challenge. The fiscal stimulus plan, while it will certainly help, probably won’t do more than mitigate the economic side effects of debt deflation. And the much-awaited announcement of the bank rescue plan left everyone confused rather than reassured." - The trouble with Obama's rescue The Obama rescue The Economist
"For all those shortcomings, the stimulus plan gets one big thing right. Given the pace at which demand is slumping, a big, and sustained, fiscal boost is vital for America’s economy. This package, albeit imperfectly, administers it.
That makes the inadequacy of the financial rescue all the more regrettable. Fiscal stimulus, indispensable as it is, cannot create a lasting economic recovery in a country with a broken financial system. The lesson of big banking busts, such as Japan’s in the 1990s, is that debt-laden balance-sheets must be restructured and troubled banks fixed before real recoveries can take off. History also suggests that countries which address their banking crises quickly and creatively (as Sweden did in the early 1990s) do better than those that dither. This is expensive and painful, but cautious, penny-pinching governments end up paying more than those that tread boldly." - "Axel Leijonhufvud says fiscal policy will not be effective until private sector balance sheets are recapitalized. However, "the American ideological taboo against 'nationalisation' ... stands in the way of dealing with the matter in the straightforward way": No ordinary recession, by Axel Leijonhufvud, voxeu.org."
- Op-Ed Columnist - Failure to Rise - NYTimes.com
"[...]So far the Obama administration’s response to the economic crisis is all too reminiscent of Japan in the 1990s: a fiscal expansion large enough to avert the worst, but not enough to kick-start recovery; support for the banking system, but a reluctance to force banks to face up to their losses. It’s early days yet, but we’re falling behind the curve." - FT.com / Columnists / Martin Wolf - Why Obama’s new Tarp will fail to rescue the banks
"Has Barack Obama’s presidency already failed? In normal times, this would be a ludicrous question. But these are not normal times. They are times of great danger. Today, the new US administration can disown responsibility for its inheritance; tomorrow, it will own it. Today, it can offer solutions; tomorrow it will have become the problem. Today, it is in control of events; tomorrow, events will take control of it. Doing too little is now far riskier than doing too much. If he fails to act decisively, the president risks being overwhelmed, like his predecessor. "
- What the centrists have wrought - Paul Krugman Blog - NYTimes.com
"The short answer: to appease the centrists, a plan that was already too small and too focused on ineffective tax cuts has been made significantly smaller, and even more focused on tax cuts." - Economist's View: Paul Krugman: On the Edge "Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive."
- FT.com / Columnists / Martin Wolf - Why dealing with the huge debt overhang is so hard
"How much debt is too much? Nobody knows. But the governments of highly indebted high-income economies – such as the US and UK – think they know the answer: more than today. They want even more credit to flow to their struggling private sectors. Is that an attainable ambition and, if so, how might it be achieved?"
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