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  • From Crunch to Catatonia [View article]
    Step 1 was to prevent bank failures by acting as the lender/buyer of last resort. Failure to do so would have cost the FDIC and the IRS a lot more than the price tag of TARP. Mission accomplished regarding step 1.

    Step 2 is to stimulate the economy through the consumer. The reason you are not seeing more lending is because consumers fear for their jobs, are facing foreclosure, and are basically broke. Public works spending, education grants, and an adequate safety net in the form of extended unemployment benefits or temporary Medicaid access for those who were laid off would be helpful here.

    Step 3 is to shift to a contractionary policy once the recovery takes hold so that high inflation does not result. Cutting government spending (e.g. get out of Iraq / Afghanistan) is critical here.
    Jan 05 17:39 pm |Rating: +3 -8
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