Growth5 Blog

Wednesday, February 11, 2009

Nitpicking what's in the stimulus package is like laboring over which specific turbo boost system to purchase for a car that doesn't work.

Old but applicable joke: "What do you get when you cross a Godfather with a deconstructionist? Someone who makes you an offer you can’t understand."

Why is everyone so focused on a stimulus bill that has little chance of making a noticeable difference when the financial system it would sit on top of is broken? It's like worrying about which specific turbo boost system to purchase for a car that doesn't work.

How do we get the car working so the turbo system will be useful? A good place to start would be to focus on what broke it in the first place. The fall of housing prices brought the financial system to its knees by exposing massively over-leveraged investment vehicles to capital calls they couldn't support. You would think the plan would include a measure to address foreclosures and the subsequent further drop in housing prices which make the toxic assets on the bank balance sheets nuclear.

Start with housing, fix the banking system (the plan may include some nationalization - so what), then stimulus - not the other way around.

Different takes on Geithner's plan (or lack thereof as it were)

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