At this moment in history, Paul Krugman is taking up the cudgels of the Administration and saying, if the government would just spend more money, then everything would be alright. I oversimplify but below is my guy Ferguson to set up the terms of the conflict. Let us recall that in 2007 Roubini was telling us stuff that most Americans refused to believe about the toxicity of subprime mortgages. I didn't believe it. I figured that as various mortgage brokers went under - the subprime lenders - that would limit the damage and the markets would be out 600 Billion and that would be the end of it. Little did I know how much retranchified and over-securitized bilge was in the asset base of 1001 banks.
Followers of Roubini, who sounded like whackjobs were essentially whackjobs. It was difficult for me to get Roubini straight from the horse's mouth in those days of my pre-economic literacy. (FWIW today) The whackjobs were saying nationalize all the banks, I was saying let them fail.
Today I'm saying that Krugman is pretending that bond vigilantes are not just around the corner and unless and until the Obama adminstration does something seriously reformative, they are going to bite him and all of us in the butt before 2012. So where I said in 2007, it's bad but it can't get that bad, I now know that in 2010 that it is very bad and has a good chance of becoming catastrophic.
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