Paul Smalera

Krugman: “I think quantitative easing (it’s really qualitative easing, but I give up on trying to fix the terminology) is the right way to go. But we should go into it with our eyes open.” Fiscal aspects of quantitative easing (wonkish) - Paul Krugman Blog - NYTimes.com.

I agree. The idea of quantitative easing is to prevent deflation. I’ve heard deflation compared to a runaway train: impossible to stop once it’s rolling. Q.E. is supposed to keep that particular train from getting away from us by powering the engine (with a big pile of fresh money) in the other direction. Yes, possibly creating inflation, but would you rather be going uphill in the right direction, or rolling downhill backwards?

All over Bangkok are massive skyscrapers that were literally abandoned and repossessed by banks when that country went through its own financial crisis, twelve years ago. Thailand waited four years to create a “bad bank,” to help salvage its banking system. In the meantime, the zombie banks of Thailand were unable to get lending started again. The result: these construction projects, into which so much time and resources had been sunk, were total losses. The US has dozens of projects that on hold right now for very much the same reason– lack of liquidity–though we did get here in a different way. Without a bad bank to help free up capital, our cities could soon look a little more like Bangkok. But Obama, Geithner and his team stalling on creating a bad bank. And whehn they talk about creating on, it’s a public private hyrid, which will limit its power to fix the crisis. Read about what happened in Bangkok, and how to avoid its happening to us, here:

Zombie Banks Build Ghost Towers | The Big Money.

I wrote a story in The Big Money today talking about this idea of a “Lost Decade.” If you’ve noticed this meme in the news, you’ll know it comes from the idea that Japan, who had their own credit and housing crisis in the early 90s, so mismanaged their response that they suffered from a lost decade of economic stagnation.


Everywhere I turn today, people are talking about staving off an American lost decade. But, if you just look at the end result of the past ten years, didn’t we already have one? And might it not help our own bailout efforts to acknowledge this fact? I think so:


Lost Decade? We Just Had One | The Big Money.