‘First the fiscal stimulus [this is Krugman’s mantra], because the troubled economy is in a freefall, so we really need to boost aggregate demand, and the sooner and larger the better. The second thing they should do is recapitalize the financial system.’

My (non-expert) take is that the stimulus, which is supposed to be aimed at Main Street, and is opposed by BushCo, doesn’t have sufficient support in the present Congress, and possibly won’t in the next one. And we can’t assume that Rubin/Summers/Geithner (& Obama?) will support a stimulus on the scale that Roubini/Krugman say is necessary to rescue Main Street. (Rubin vetoed Clinton’s first term public works promises, declaring that priority had to be given to reducing Reagan’s deficits.)

‘Recapitalizing the financial system’ is what Rubin/Summers/Paulson, etc (& Obama?) are all about. Despite Wall Street’s recklessness, insolvency, dishonesty, and self-dealing, our reigning economic theory dictates that we must re-prime the pump with unlimited public money, and re-start the trickle-down.

I think its possible this is what they have wanted for sometime. The idea of starving the beast has permeated their thought processes for a long time. Remember these are the people who think the constitution was lost since FDR’s time ( Commerce clause based congressional lawmaking ) The history of the US includes a number of deflationary periods (1873 was particularly vicious) Their ancestors where not part of the 25 % unemployed, evicted, foreclosed on, and otherwise beaten down in the 1929-1933 time period. Even though there are “liberal” and “conservative” economists saying we need a big stimulus, economics also has a political dimension.

Another small mater here is that if Obama pulls off an economic miracle then GOP is not only a rump party buy officially toast. They will do almost anything to prevent BO from having a good term so they have something to run on in 2010 and 2012. Don’t expect the honeymoon to last very long. And with Conservative Dems in the senate don’t expect much to pass very quickly mandate or no.

I think we are screwed, hope to be proven wrong though.

bille

http://www.newsweek.com/id/170712

Thoughts, experts?

But I think that the significance of this beef is that the turf she happens to be defending is an interface of government and Main Street, while Geithner, who I agree is a Rubin/Summers stand-in, represents the casino monetarism of the FIRE interests on Wall Street.