A cross-section of doom

Courtesy of the NY Times:

The End of the Financial World as We Know It by Michael Lewis and David Einhorn. How the Madoff scandal and the market's general collapse have undermined America's standing in the financial world, and what they reveal about the nation's financial mindset.

Fighting Off Depression by Paul Krugman. This is exactly what it looks like: Krugman says it's time to gird our loins for The Second Great Depression.

Milton Friedman, in particular, persuaded many economists that the Federal Reserve could have stopped the Depression in its tracks simply by providing banks with more liquidity, which would have prevented a sharp fall in the money supply. Ben Bernanke, the Federal Reserve chairman, famously apologized to Friedman on his institution’s behalf: “You’re right. We did it. We’re very sorry. But thanks to you, we won’t do it again.”

It turns out, however, that preventing depressions isn’t that easy after all. Under Mr. Bernanke’s leadership, the Fed has been supplying liquidity like an engine crew trying to put out a five-alarm fire, and the money supply has been rising rapidly. Yet credit remains scarce, and the economy is still in free fall.

Friedman’s claim that monetary policy could have prevented the Great Depression was an attempt to refute the analysis of John Maynard Keynes, who argued that monetary policy is ineffective under depression conditions and that fiscal policy — large-scale deficit spending by the government — is needed to fight mass unemployment. The failure of monetary policy in the current crisis shows that Keynes had it right the first time. And Keynesian thinking lies behind Mr. Obama’s plans to rescue the economy.

But these plans may turn out to be a hard sell.

Obama Plan Includes $300 Billion in Tax Cuts from the NYT business section. It's a good companion piece to get an idea of what "Keynesian thinking" actually is.

And on the lighter side, Bruce Sterling sums it up from a delinquent's point of view, courtesy of BoingBoing:

I'm a bohemian type, so I could scarcely be bothered to do anything "financially sound" in my entire adult life. Last year was the first year when I've felt genuinely sorry for responsible, well-to-do people. Suddenly they've got the precariousness of creatives, of the underclass, without that gleeful experience of decades spent living-it-up.

These are people who obeyed the social contract and are *still* getting it in the neck.