Current State of the Economy - in a Book
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When you make inferences on the current state of the economy based upon someone's book, you have to realize that you're "looking through the rear view mirrow" in order to drive your car - or the economy, for that matter. If you're going to do that, you had better trust the information you're getting, and it had better be as current as possible.
Given those facts, here are simple recommendations based upon Paul Krugman's (Krugman, 186) analysis:
- The $700 billion (it has since grown) won't be enough because it is too small relative to the economy. This is based upon the Japanese experience a decade ago.
- There is a "shadow" banking system that is largely unregulated. That system is the one that needs the money most. It may not get what it needs.
- The banks are likely to receive money from the feds and sit on it as opposed to handing it out in the form of loans. That doesn't do anyone any good. The Fed may actually have to make direct loans to business by buying commercial paper.
- Eventually, we'll have to make the recapitalization wider and broader and become closer to a nationalization of the banking system, if only for a short time.
The bottom line seems to be there'll have to be more money to turn things around. You gotta trust someone. Krugman's advice might be a good next step.
Reference
Krugman, Paul. The Return of Depression Economics and the Crisis of 2008. W. W. Norton & Company. 2009.