My Poorly Informed Opinion on the Financial Crisis

FWIW put me in Menzie Chinn’s camp on dealing with the current lending crisis:

The lesson I take is that it’s not an either-or proposition. Policymakers might need to lower interest rates, either to offset systemic illiquidity, or to stabilize output. But if these actions are necessary, then one needs to consider how to implement effective regulation, rather than dismissing regulation on ideological grounds (see this post on the Administration’s view of financial regulation, which has in part led to the current state of affairs).

You’ve got to deal with today’s problem today but keep one eye on the stuff that caused the problem in the first place.

Unfortunately, we’ve already got politicians, their gaze fixed firmly on 2008, getting into a bidding war on how much to spend bailing out people who haven’t lost anything and don’t need to be bailed out.

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