Get ready for a 20 year recession

[SeattleUte]

So Nancy Pelosi says, "Fine, you can have a trillion dollars to buy all those bad debts from the banks." But in addition, or, as quid pro quo, she wants relief for the bad debtors, and a host of social programs. In other words, the government has to buy bonds en mass that the banks can't move, AND give the ultimate debtors on the paper a break. How is this different than Argentina printing money to solve its problems way back when? That led to 17,000 percent inflation. SOme people are worried about 70's style U.S. inflation now.

Meanwhile, the Treasury Dept. has gone on the market and started to buy bonds to stimulate the market. The precedent cited for this is Japan. Japan has been in a virtual or actual recession for twenty years. It used to be understood that this was because the Japanese government played favorites and wouldn't let any banks fail.

I'm starting to wonder if 1) the Republicans would be so quick to turn to these radical Keynsian "fixes" if it weren't a presidential election year, and 2) whether it wouldn't be better to just let events take their course. It seems like every bank is in trouble, but really most banks are not going broke. Bank of America was in a position to buy Merrill Lynch, and my community bank seem to be okay.

The worst thing the press is saying would happen is people would lose their money markets in failing banks, and loans would be a lot harder to get (oh no! not that! how terrible people won't be able to have such easy money). People don't tend to put life savings in money markets, and it's usually the more afffluent who use them.

http://www.nytimes.com/2008/09/21/bu...prod=permalink