Monday, January 21, 2008

Economist's View: "It's an Insult to Keynes"

On a U.S. holiday weekend, the financial markets across the globe have been having a bit of a meltdown, dropping around 5%. As of this hour, late on Monday night, it looks as if the Dow will open Tuesday, down about 500 points.

The U.S. economy is coming into contact with reality, the U.S. financial system is insolvent, and U.S. consumption spending seems likely to decline. The world is not happy with this.

So far, the Administration response has been a stimulus package -- everyone gets a check from Uncle Sam, to spend.

Do I Understand This Correctly? says...
Foreign savers will no longer lend to citizens for consumption (by buying securitized mortgages and such), so the gov will temporarily borrow the money from foreign savers and give it to citizens to spend."

This is supposed to smooth the transition.

It is looking like the Republicans may succeed in pushing off most of the consequences of their catastrophic policies onto the next, Democratic President. That poor schmuck, or schmuckette, will get to "lose Iraq" and preside over a decline in the American standard of living.

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